If Regulation Imposes Marginal Cost Pricing on a Natural Monopoly

question 95

Multiple Choice

If regulation imposes marginal cost pricing on a natural monopoly, then the monopoly will:

• A) suffer persistent economic losses.
• B) earn a fair, but not excessive, return on its assets.
• C) produce too little output to achieve efficiency.
• D) experience diseconomies of scale.

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Definitions:

Verify

To check or test the accuracy or correctness of something.

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Partnership

A legal form of business operation between two or more individuals who share management and profits or losses.