There Is a Deadweight Loss If a Natural Monopoly Is

question 148

Multiple Choice

There is a deadweight loss if a natural monopoly is regulated to use

• A) marginal cost pricing and if it is regulated to use average cost pricing.
• B) average cost pricing and if it is allowed to be unregulated and maximize its profit.
• C) marginal cost pricing and if it is allowed to be unregulated and maximize its profit.
• D) None of the above answers is correct.

---

Definitions:

Internal Rate

Typically refers to the internal rate of return (IRR), which is a rate of return used in capital budgeting to measure and compare the profitability of investments.

Preference Decisions

Choices made between alternatives based on preferences for certain criteria or outcomes.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Future Dollar

A term referring to the value of a dollar at a specific point in the future, accounting for factors like inflation.