If the Government Attempts to Force a Natural Monopoly to Charge

question 135

Multiple Choice

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

• A) the natural monopoly will shut down.
• B) the natural monopoly will still make high profits.
• C) the natural monopoly's marginal cost curve will shift up.
• D) total welfare is maximized.

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Definitions:

Aircraft Production

The process and industry involved in designing, manufacturing, and assembling aircraft.

Newspaper Printing

The process of mass-producing copies of a newspaper document, whereby the news and other data are printed onto papers.

Economies of Scale

The cost advantage that arises with increased output of a product, where the average cost per unit decreases as the scale of production rises.

Inputs

Resources such as labor, materials, and capital used in the production process to create goods and services.