Ceteris Paribus, Which of the Following Firms Is Expected to Earn

question 26

Multiple Choice

Ceteris paribus, which of the following firms is expected to earn the greatest economic profits?

• A)An unregulated monopolist that is able to price discriminate
• B)An unregulated monopolist that is unable to price discriminate
• C)A regulated monopolist that is required to charge a price that is equal to marginal cost
• D)A regulated monopolist that is required to charge a price that is equal to average cost
• E)A regulated monopolist that is required to charge a price that is equal to marginal revenue

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Definitions:

Elastic

Describes a situation in which the demand or supply for a good or service significantly changes in response to changes in price.

Consumer Surplus

The discrepancy between the total sum consumers are prepared and capable of spending on a product or service and the actual total sum they end up paying.

Price Ceiling

A price ceiling is a government-imposed limit on how high a price can be charged for a product, service, or resource, usually set below the market equilibrium price to make goods more affordable.

Market Equilibrium

A point in a market where the quantity of goods supplied is equal to the quantity of goods demanded.