Compared to the Profit-Maximizing Outcome,average-Cost Pricing in a Natural Monopoly

question 34

Multiple Choice

Compared to the profit-maximizing outcome,average-cost pricing in a natural monopoly leads to _____

• A)a lower marginal cost.
• B)a higher price.
• C)decreased consumer surplus.
• D)the elimination of economic profit.
• E)less output.

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Definitions:

Likelihood of Collection

The probability that debts owed to a company will be paid by its debtors.

Materiality Constraint

An accounting principle that states financial information is material if its omission could influence decisions.

Direct Write-Off Method

An accounting method where uncollectable debts are written off to the expense account directly when they are deemed uncollectable.

Accounts Receivable Turnover

A financial metric that measures how efficiently a company collects revenue from its credit sales.