Most Natural Monopolies Are Regulated at Some Level by Government

question 21

Multiple Choice

Most natural monopolies are regulated at some level by government because:

• A)an unregulated natural monopolist would produce an inefficiently low level of output.
• B)an unregulated natural monopolist would produce only for government bureaucrats.
• C)an unregulated natural monopolist would charge an inefficiently low price in the market.
• D)an unregulated natural monopolist would charge an inefficiently high price in the market.
• E)an unregulated natural monopolist would produce a large quantity at a high price.

---

Definitions:

Economic Payoff

The financial return or reward received from an investment or decision, measured in terms of profit or loss.

Equity

Fairness; everyone gets his or her fair share. Since people can disagree about what is “fair,” equity is not as well defined a concept as efficiency.

Rational Decision

The choice made by logically considering all available information, potential costs, and benefits to achieve the optimal outcome.

Bounded Rationality

A concept suggesting that decision-making is limited by the information available, cognitive limitations of the mind, and the finite amount of time available to make a decision.