The Rail System in Metropolis Is a Natural Monopoly

question 102

Multiple Choice

The rail system in Metropolis is a natural monopoly.If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?

• A)Price and output will be higher than if the monopoly were unregulated.
• B)Price and output will be lower than if the monopoly were unregulated.
• C)Price will be lower and output higher than if the monopoly were unregulated.
• D)Price will be higher and output lower than if the monopoly were unregulated.
• E)Profit will be lower than if the monopoly were unregulated, but price and output could either increase or decrease.

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