A Natural Monopoly Regulated with an Average Cost Pricing Rule

question 18

Multiple Choice

A natural monopoly regulated with an average cost pricing rule is

• A) efficient and incurs an economic loss.
• B) inefficient and makes zero economic profit.
• C) inefficient and makes an economic profit.
• D) efficient and makes zero economic profit.

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Definitions:

Marginal Product

The additional output produced by using one more unit of a input, holding all other inputs constant, used in the analysis of production efficiency.

Raking Leaves

The activity of gathering fallen leaves into a pile using a rake, often performed as part of garden maintenance or cleanup.

Derived Demand

The demand for a commodity, service, etc., that is a consequence of the demand for something else.

Marginal Product

The additional output gained by employing one more unit of a specific factor of production, ceteris paribus.