In the Absence of a Subsidy,production Efficiency by a Natural

question 129

Multiple Choice

In the absence of a subsidy,production efficiency by a natural monopolist will

• A)Be achieved if price is set equal to average total cost.
• B)Be achieved if marginal revenue is set equal to marginal cost.
• C)Be achieved if price is set equal to marginal cost.
• D)Never be achieved.

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Definitions:

Present Value

The current financial value of a future financial sum or sequences of payments, assessed with a predefined rate of earnings.

Interest Rate

The cost of borrowing money or the return on savings, typically expressed as a percentage of the principal amount per year.

Discounting

The process of determining the present value of future cash flows by applying a discount rate to reflect time value of money and risk.

Equilibrium Interest Rate

The interest rate at which the quantity of loanable funds demanded equals the quantity of loanable funds supplied.