Policymakers Are Discussing Various Proposals Regarding How to Deal with Natural

question 104

Multiple Choice

Policymakers are discussing various proposals regarding how to deal with natural monopolies.Transportation Minister Gaston wants to regulate natural monopolies by equating price with average total cost.Gaston contends that such a policy will ensure that monopolies make every effort to reduce costs.Finance Minister Chen wants the government to own natural monopolies.Chen argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies.Which Minister's argument is correct

• A)Transportation Minister Gaston's argument
• B)Finance Minister Chen's argument
• C)both ministers' arguments
• D)neither minister's argument

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Definitions:

Activity Rate

The predetermined rate used to allocate overhead costs to cost objects based on activities.

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities required to produce each product or service, aiming for more precise cost allocation.

Overhead Cost

All indirect costs associated with the operation of a business, including administrative expenses, depreciation, and utilities.

Activity-Based Costing

A costing methodology that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.