If a Monopolist's Production Process Has Economies of Scale and Average

question 67

Multiple Choice

If a monopolist's production process has economies of scale and average cost exceeds marginal cost, then

• A)the government could set price equal to marginal cost and subsidize the monopoly.
• B)the government should not offer a subsidy, since the monopoly can make a profit setting price equal to marginal costs.
• C)if the government sets price equal to average cost, the monopoly will go out of business.
• D)the government cannot regulate price.

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Definitions:

Euryarchaeota

A phylum of Archaea, characterized by a diverse range of organisms that include methane producers and salt-loving species.

Hydrothermal Vents

Deep-sea ecosystems found near geothermally heated water emissions, rich in unique life forms adapted to high-pressure, low-light conditions.

Sulfur Springs

Natural springs that emit water containing a high concentration of sulfur and other minerals, often used for therapeutic benefits.

Chemoautotroph

Organisms that obtain energy by the oxidation of inorganic substances, using this energy to synthesize organic molecules from carbon dioxide.