One Problem with Regulating a Monopolist on the Basis of Cost

question 88

Multiple Choice

One problem with regulating a monopolist on the basis of cost is that

• A)by focusing on costs, the regulators ignore profits.
• B)it does not provide an incentive for the monopolist to reduce its cost.
• C)a monopolist's costs, by definition, are higher than costs of perfectly competitive firms.
• D)a monopolist is still able to generate excessive economic profits.

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Definitions:

Medical Reason

Justifiable cause based on health or physical condition that explains a particular decision, action, or outcome in a medical context.

Paranoid Personality Disorder

A personality disorder characterized by persistent suspiciousness but not involving the disorganization of paranoid schizophrenia.

Suspicious

Characterized by a cautious distrust or skepticism about someone or something's motives or authenticity.

Trust

A psychological state or condition where an individual has confidence in the reliability, truth, or ability of someone or something.