-Use the Above Figure

question 269

Multiple Choice

-Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to

• A) losses, which would drive the monopolist out of business in the long run.
• B) profits, which would encourage new producers to enter the industry in the long run.
• C) profits, but new firms cannot enter the industry in the long run due to high barriers to entry.
• D) losses, which would encourage the monopolist to lower costs in the long run.

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Definitions:

Salary Allowances

Additional benefits or compensations given to employees over and above their regular salary, which could include housing, transportation, or medical allowances.

Net Income

The ultimate earnings of an enterprise once it has accounted for all expenditures and taxes against its total sales.

Liquidating Partnership

The process of dissolving a partnership by selling off assets, paying off liabilities, and distributing the remaining assets to partners.

Capital Accounts

Accounts that reflect the initial and subsequent contributions of owners or partners, along with their share of the net income or loss over time.