A Natural Monopoly Can Purposely Increase Its Cost of Production

question 54

Multiple Choice

A natural monopoly can purposely increase its cost of production by

• A)Using its own unregulated subsidiary to inflate its cost.
• B)Substituting cheaper inputs.
• C)Keeping marginal costs low.
• D)Using government subsidies to offset losses.

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Definitions:

Public Good

Nonexclusive and nonrival good; the marginal cost of provision to an additional consumer is zero and people cannot be excluded from consuming it.

Common Property Resource

A type of good consisting of natural or human-made resources where users have shared rights, often leading to problems of overuse or depletion.

Quota

A government-imposed trade restriction that limits the number, or monetary value, of goods that can be imported or exported during a specific time period.

Public Good

A product or service that is non-excludable and non-rivalrous, meaning its use by one individual does not reduce availability to others, and people cannot be effectively excluded from using the good.