If an Average Cost Pricing Rule Is Imposed on the Natural

question 343

Multiple Choice

If an average 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 $9 million.

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Definitions:

Glomerulus

A cluster of capillaries in the kidneys that filters blood, initiating the process of urine formation.

Distal Convoluted

Pertains to the part of the nephron in the kidney farther from the renal corpuscle, involved in the reabsorption of water, sodium, and chloride.

Loop Of Henle

The portion of the renal tubule that curves back toward the renal corpuscle and twists again to become the distal convoluted tubule.

Renal Corpuscle

The initial filtering component of the nephron in the kidney, where blood plasma is filtered through the capillary walls of the glomerulus into the Bowman's capsule.