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.

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Definitions:

Efficient Markets

A concept that asserts that financial markets are "informationally efficient," meaning that prices of securities reflect all available information at any given time.

Opportunity Cost

The cost of choosing one alternative over another, typically representing the benefits you could have received by taking a different action.

Alternative Use

The potential other applications or purposes for which a resource, asset, or investment could be utilized instead of its current use.

Game

An interactive, often competitive activity involving skill, chance, or endurance on the part of two or more persons who play by a set of rules, usually for entertainment.