If a Regulatory Board Wanted to Make Sure That a Natural

question 48

Multiple Choice

If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:

• A)marginal cost.
• B)average fixed cost.
• C)average variable cost.
• D)average total cost.
• E)average total cost, plus a ten percent normal return on investment.

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Definitions:

Production Possibility Frontier

A graph that shows the maximum possible output combinations of two goods or services an economy can achieve when using all available resources efficiently.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time.

Quantity Demanded

The overall quantity of a good or service buyers intend and can afford to acquire at an established price.

Substitutes

Products or services that can be used in place of each other, offering consumers choices in the marketplace.