If a Regulatory Board Wanted to Make Sure That a Natural

question 57

Multiple Choice

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return, it should set price which is 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:

Logical

Pertaining to or characterized by clear, systematic reasoning and thought.

Rational

Based on logic or reason; capable of coherent thought processes leading to sound decisions or judgments.

Continuum

A continuous sequence in which adjacent elements are not perceivably different from each other, though the extremes are quite distinct.

Intense Relationships

Relationships characterized by strong emotions, extreme closeness or dependency, and often turbulent interactions.