Which of the Following Is Not a Problem Associated with Regulation

question 43

Multiple Choice

Which of the following is not a problem associated with regulation of a natural monopoly?

• A)Regulation using average-cost pricing reduces a firm's incentive to keep costs down.
• B)Regulation stifles the incentive that firms have to innovate.
• C)Regulators do not have full information about a firm's demand and cost functions.
• D)Regulation increases collusion and cartelization among firms.

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Definitions:

Vertical Integration

A business strategy where a company controls multiple stages of production or distribution within the same industry to increase efficiency and reduce costs.

Carnegie Steel

A steel production company established by Andrew Carnegie in the late 19th century, which played a significant role in the growth of the American steel industry.

Standard Oil

An American oil producing, transporting, refining, and marketing company established by John D. Rockefeller, which was a major part of the early petroleum industry and later broken up due to antitrust laws.

Singer Sewing Machines

A brand of sewing machines that became synonymous with the domestic and industrial sewing machine industry starting in the 19th century.