Suppose the Local Government Is Considering Using Marginal Cost Pricing

question 111

Multiple Choice

Suppose the local government is considering using marginal cost pricing to set rates for a cable TV company.Which of the following arguments supports marginal cost pricing?

• A)Marginal cost pricing gives the monopoly economic profit and a reason to stay in business.
• B)Marginal cost pricing gives the firm a normal economic profit and a reason to stay in business.
• C)Marginal cost pricing is allocatively efficient.
• D)Average cost pricing requires subsidies, which can be costly.
• E)Average cost pricing forces monopolies to operate at a loss.

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Definitions:

Iris Muscles

Muscular structures in the eye that adjust the size of the pupil to regulate the amount of light entering the eye.

Lens

A transparent structure in the eye that focuses light rays onto the retina to form clear images.

External Auditory Canal

The tube that runs from the outer ear to the eardrum, facilitating the travel of sound.

Weber Test

A hearing test that uses a tuning fork to evaluate conductive and sensorineural hearing loss across both ears.