The Figure Below Shows Revenue and Cost Curves of a Natural

question 76

Multiple Choice

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
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In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-Suppose that the demand for apples in Washington is elastic and the supply is inelastic. If the government of Washington passes a law prohibiting the use of synthetic pesticides that increases the marginal and average costs of producing apples, then:

• A)the price of Washington State apples will decline.
• B)Washington will stop producing apples, and New York apple growers will benefit.
• C)apple growers will pass most of the increased costs on to consumers in the form of higher apple prices.
• D)apple growers will keep prices constant but reduce costs by advertising less.
• E)apple growers will bear most of the increased costs of regulation, and prices will increase only slightly.

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Definitions:

Common Fixed Expenses

Common fixed expenses are overhead costs shared across multiple segments or products of a business, like administrative salaries or building rent.

Break-Even

The point at which total costs and total revenue are equal, meaning there is no net loss or gain.

Sales Dollars

The total revenue generated from selling goods or services, measured in dollars.

Common Fixed Expenses

Expenses that do not change with the volume of production or sales and are shared among different segments or products of a business.