If the Regulator Wants to Avoid Any Deadweight Loss in a Natural

question 289

Multiple Choice

If the regulator wants to avoid any deadweight loss in a natural monopoly market, the regulator has the firm set its price equal to its

• A) average fixed cost.
• B) average total cost.
• C) average variable cost.
• D) marginal cost.

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Definitions:

Unfunded Liability

A future government spending commitment (liability) for which the government has not legislated an offsetting revenue source.

Social Security

The social insurance program in the United States financed by federal payroll taxes on employers and employees and designed to replace a portion of the earnings lost when workers become disabled, retire, or die.

Monetary Policy

A central bank’s changing of the money supply to influence interest rates and assist the economy in achieving price-level stability, full employment, and economic growth.

U.S. Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining financial stability, and providing banking services.