To Allow a Public Utility (Which Is a Natural Monopoly)to

question 15

Multiple Choice

To allow a public utility (which is a natural monopoly) to earn only a normal profit, the government should

• A)do all of the following
• B)set price equal to average cost
• C)equate marginal cost and average cost
• D)set marginal cost equal to marginal revenue
• E)set price equal to marginal cost

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Definitions:

Income Statement

A financial document that shows a company's revenues, expenses, and net income over a specific period of time.

Revenue Expenditures

Payments made for ordinary maintenance of an asset or unnecessary or unreasonable situations.

Plant Assets

Long-term tangible assets used in the production of goods or services.

Capital Expenditures

Original cost of an asset as well as additions or enlargements, extraordinary repairs, and betterments.