Figure 15-16 Figure 15-16 Shows the Market Demand and Cost Curves Facing

question 186

Multiple Choice

Figure 15-16

Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

• A)This results in a misallocation of resources.
• B)The marginal cost of producing the last unit sold exceeds the marginal benefit.
• C)The firm will sustain persistent losses and will not continue in business in the long run.
• D)The firm will break even.

---

Definitions:

Direct Labor

The wages or expenses incurred for labor that is directly involved in the manufacturing of a product.

Process

A series of actions or steps taken in order to achieve a particular end in business or manufacturing.

Job Order

A work instruction or order for producing a specific quantity of a product or service according to customer specifications.

Conversion Cost

The combined costs of direct labor and manufacturing overheads associated with converting raw materials into finished products.