The Rail System in Metropolis Is a Natural Monopoly

question 117

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)The managers of the rail system will be allowed to adjust marginal cost so that they can get a normal rate of return on capital.
• B)The managers of the rail system will be allowed to adjust marginal cost so that they can get a fair profit.
• C)The rail system will earn economic profit at that fare.
• D)If the government doesn't give the rail system a subsidy to supplement revenue from fares, the system will face continuous economic losses.
• E)If the government doesn't give the rail system a subsidy to supplement revenue from fares, fare increases will push marginal cost upward.

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Definitions:

Photosynthetic Organism

An organism that converts sunlight into chemical energy through the process of photosynthesis.

Specialized Cells

Cells that have developed specific characteristics and functions through the process of differentiation.

Multicellular

Organisms that consist of more than one cell, exhibiting cellular differentiation and specialization for various functions.

Hierarchical Organization

A system of organization where entities are ranked one above the other based on authority or status.