If a Natural Monopoly Is Told to Set Price Equal

question 286

Multiple Choice

If a natural monopoly is told to set price equal to average cost,then the firm

• A) is not able to set marginal revenue equal to marginal cost.
• B) automatically also sets price equal to marginal cost.
• C) will make a substantial economic profit.
• D) will incur an economic loss.
• E) sets a price that is lower than its marginal cost.

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Definitions:

Aqueous Humor

Watery, clear solution that fills the anterior and posterior chambers of the eye.

Suspensory Ligament

A fibrous tissue that connects the lens of the eye to the ciliary body, adjusting the lens's shape for focusing.

Cones

Photoreceptor cells in the retina of the eye responsible for color vision.

Vitreous Humor

The clear, gel-like substance that fills the space between the lens and the retina of the eyeball.