One Way to Take Advantage of Economies of Scale and to Avoid

question 61

Multiple Choice

One way to take advantage of economies of scale and to avoid the market power of a natural monopoly is through:

• A) price control.
• B) privatizing the monopoly.
• C) breaking up the monopoly into several smaller companies.
• D) penalty.

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Definitions:

Common Stock

Shares entitling the holder to dividends that fluctuate in amount and the right to vote on the company's policy and corporate decisions.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from its total revenue.

Equity Method

An accounting technique used by firms to assess the profits earned through their investment in other companies, recording income based on their share of net earnings.

Common Stock

Shares entitling their holder to dividends that vary in amount and may even be omitted, unlike preferred stock which has a fixed dividend.