The Figure Below Shows Revenue and Cost Curves of a Natural

question 60

Multiple Choice

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
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In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-Which of the following calculations is necessary to determine whether a regulation should be implemented?

• A)Marginal cost-marginal revenue calculations
• B)Cost effectiveness calculations
• C)Total cost-total revenue calculations
• D)Cost minimization calculations
• E)Cost-benefit calculations

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Definitions:

NPV

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or project, calculated by summing the present values of incoming and outgoing cash flows.

Cost of Capital

The rate of return that a company must pay on its investments to satisfy its shareholders or debt-holders.

Cash Flows

All money transactions entering and leaving a firm, with a significant influence on its liquidity.

Interest Payments

The amount paid by a borrower to a lender as compensation for the use of borrowed money.