Compared to the Profit-Maximizing Outcome,average-Cost Pricing in a Natural Monopoly

question 34

Multiple Choice

Compared to the profit-maximizing outcome,average-cost pricing in a natural monopoly leads to _____

• A)a lower marginal cost.
• B)a higher price.
• C)decreased consumer surplus.
• D)the elimination of economic profit.
• E)less output.

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Definitions:

Annual Interest Rate

The percentage increase in money owed or invested over a year, due to interest.

Amortize

The process of gradually paying off a debt or spreading the cost of an intangible asset over its useful life for accounting and tax purposes.

Equal End-of-Year

A term referring to payments or allocations that are made uniformly at the end of each year.

Effective Annual Rate

The effective annual rate (EAR) is the interest rate on a financial product restated from nominal terms into an annualized rate accounting for compounding over a period.