If the Regulator Require a Natural Monopoly Set Its Price

question 409

Multiple Choice

If the regulator require a natural monopoly set its price equal to its marginal cost, that would ensure

• A) an economic profit for the firm.
• B) zero economic profit for the firm.
• C) an economic loss for the firm.
• D) an accounting loss for the firms.

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Definitions:

Purchased Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its net identifiable assets at the acquisition date.

Market Value

The existing rate at which an asset or service is offered for buy or sell within the marketplace.

Amortize Intangible Assets

The process of systematically reducing the recorded cost of intangible assets over their useful life or legal life, whichever is shorter.

Useful Lives

The estimated time period that an asset is expected to be used by a business, contributing to its revenue generation.