Use the Information Below to Answer the Following Questions

question 78

Multiple Choice

Use the information below to answer the following questions.
Fact 13.5.1
Cascade Springs Inc. is a natural monopoly that bottles water from a spring high in the Rocky Mountains. The total fixed cost it incurs is $80,000, and its marginal cost is 10 cents a bottle. The demand curve for Cascade Springs bottled water is shown in the following figure:

Figure 13.5.1
-Refer to Figure 13.5.1. Suppose the government regulates the firm with average cost pricing. What is the price?

• A)$0 a bottle
• B)$0.50 a bottle
• C)$0.30 a bottle
• D)$0.10 a bottle
• E)$0.20 a bottle

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Definitions:

Reasoning

The drawing of conclusions or inferences from observations, facts, or assumptions.

Framing

The way information is presented to users, which can influence decision-making and judgment by highlighting certain aspects while excluding others.

Reflective Judgment

The process of critically evaluating the validity of various propositions or hypotheses.

Prereflective Thinking

A level of cognition occurring without conscious awareness or reflection on the thought process itself.