When Regulators Use a Marginal-Cost Pricing Strategy to Regulate a Natural

question 23

Multiple Choice

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly:

• A)has no incentive to exit the industry
• B)will experience a price below average total cost
• C)may rely on a government subsidy to remain in business
• D)both B and C are true

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Definitions:

La Niña

A climate pattern characterized by cooler than average sea surface temperatures in the central and eastern tropical Pacific Ocean, influencing global weather patterns.

Moist Air

Air that contains a high level of water vapor, often leading to higher humidity levels and affecting weather patterns and human comfort.

Precipitation

Any water substance, whether solid or liquid, that comes down from the clouds and touches the Earth, encompassing rain, snow, sleet, and hail.

Greenhouse Effect

The warming of Earth's surface and lower atmosphere caused by the presence of certain gases in the air which trap energy from the sun.