If the Government Wants to Regulate a Natural Monopoly While

question 103

Multiple Choice

If the government wants to regulate a natural monopoly while ensuring it does not earn profits or require subsidies,it will force the firm to set price equal to

• A) average cost.
• B) marginal cost.
• C) marginal revenue.
• D) None of the above.

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace on investments or loans, subject to changes based on supply and demand and economic conditions.

Discount

A reduction from the usual cost of something, often used to encourage sales or purchases.

Debt Financing

A method of raising capital through borrowing, which involves taking loans or issuing bonds.

Equity Financing

A method of raising capital through the sale of shares in a company, giving investors ownership interests.