Utility Price and Profit Regulation Is Based on the Perception

question 12

Multiple Choice

Utility price and profit regulation is based on the perception of:

• A) externalities.
• B) diseconomies of scale.
• C) natural monopoly.
• D) Consumers' surplus.

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Definitions:

Excess Capacity

The situation where a firm is producing less than the maximum output due to lack of demand.

Profit-Maximizing Rule

A principle stating that profit maximization occurs when a firm's marginal cost equals its marginal revenue.

Perfectly Competitive

Describes a market structure where many firms sell identical products, there are no barriers to entry or exit, and all firms are price takers.

Excess Capacity

A situation where a firm is producing at a lower scale of output than it has been designed for, leading to inefficiencies.