-If a Marginal Cost Pricing Rule Is Imposed on the Natural

question 523

Multiple Choice

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

• A) incur an economic loss.
• B) make zero economic profit, that is, its owners make a normal profit.
• C) make an economic profit of $4 million.
• D) make an economic profit of $16 million.

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Definitions:

Legally Non-Existent

Refers to an entity or agreement that has no recognition or validity under the law.

Respondeat Superior

A legal doctrine holding an employer or principal legally responsible for the wrongful acts of an employee or agent, when such acts occur within the scope of employment or agency.

Subagent

An agent appointed by another agent to perform tasks or duties on behalf of the original agent's principal.

Authorized Transaction

A financial operation that has been approved or permitted by the relevant authorities or parties involved.