Setting Price Equal to Marginal Cost in a Natural Monopoly

question 138

Multiple Choice

Setting price equal to marginal cost in a natural monopoly will lead to

• A)excess profits for the firm.
• B)losses for the firm.
• C)zero profits for the firm.
• D)One cannot tell without further information.

Understand the basic economic problem of scarcity and how it requires choices that entail opportunity costs.

Describe the functions of entrepreneurs in the economy and differentiate between various economic resources.

Distinguish between macroeconomics and microeconomics and their areas of study.

Appreciate the role and limits of economic models and theories in explaining real-world phenomena.

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Definitions:

Desired Response

The specific behavior or outcome that an individual or entity aims to elicit through a particular action or stimulus.

Immediately After

Occurring directly following a particular event or time.

Negatively Reinforced

Refers to the process of increasing a behavior by removing or avoiding a negative outcome or stimulus.

Positively Reinforced

The process of increasing the likelihood of a behavior by following it with a desirable outcome or reward.