The Government of a State Wants Gigantic Software Corp

question 94

Multiple Choice

The government of a state wants Gigantic Software Corp.,a natural monopoly,to stay in business yet still produce where price equals marginal cost.In order to encourage Gigantic Software Corp.to stay in business,the government might choose to _____

• A)set a price ceiling 10 percent lower than its previous level.
• B)impose a tax on the company for each dollar of sales.
• C)establish regulations that raise the company's cost of doing business.
• D)provide a subsidy to the company to cover the loss and ensure a normal profit.
• E)replace the company's top management.

---

Definitions:

Source Of Cash

Any activity or operation that brings in cash to a business, such as sales of goods and services, debt, or equity financing.

Common Stock

Represents ownership shares issued by a corporation, giving holders voting rights and a share in the company's profits via dividends.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions to shareholders, reinvested in the business.

Measure Of Liquidity

Indicators that demonstrate a company's ability to cover its short-term obligations with its liquid assets.