It Is Unrealistic to Regulate a Natural Monopoly at Marginal

question 56

Multiple Choice

It is unrealistic to regulate a natural monopoly at marginal cost pricing because

• A) the government is not allowed to regulate markets.
• B) marginal cost pricing ends up having the natural monopoly firm earn zero economic profits.
• C) with this type of regulation,the firm will want to shut down,and that outcome is not desirable for society.
• D) regulating a market causes more deadweight loss.
• E) firms do not need to follow regulations from the government.

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Definitions:

Bonds

Debt securities issued by corporations, governments, or other entities to investors, promising to repay the principal along with interest at a specified date.

Annual Market Rate

The interest rate applicable for a period of one year, often used in the context of loans, savings, or investments.

Present Value Tables

Tables that help in determining the present value of a future amount of money or stream of cash flows given a specific interest rate.

Issue Price

The issue price is the price at which securities, such as bonds or stocks, are sold to the public or initial investors during their first offering.