One Problem with Regulating a Monopolist on the Basis of Cost

question 88

Multiple Choice

One problem with regulating a monopolist on the basis of cost is that

• A)by focusing on costs, the regulators ignore profits.
• B)it does not provide an incentive for the monopolist to reduce its cost.
• C)a monopolist's costs, by definition, are higher than costs of perfectly competitive firms.
• D)a monopolist is still able to generate excessive economic profits.

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Definitions:

Firm Revenue

The total income received by a company from its sales of goods or services before any expenses are subtracted.

Economy

The system of production, distribution, and consumption of goods and services within a geographical region.

Monopoly Position

A market condition where a single entity dominates the supply of a particular good or service, limiting competition.