The Diagram Below Shows Cost and Revenue Curves for a Natural

question 54

Multiple Choice

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day. FIGURE 12-7
-Refer to Figure 12-7.Suppose this firm is being regulated using a pricing policy of average-cost pricing.In this case,economic profits are equal to

• A)$10 000.
• B)$6000.
• C)$126 000.
• D)$28 000.
• E)$0.

---

Definitions:

Marginal Social Benefits

The additional benefit that society gains from consuming one more unit of a good or service.

Marginal Social Cost

The total cost to society of producing one additional unit of a good or service, including both private costs and any external costs.

Pollution Emissions

The release of pollutants into the air, water, or soil by industrial processes or other human activities.

Marginal Social Benefit

The additional gain to society as a whole resulting from an additional unit of a good or service being produced and consumed.