The Rail System in Metropolis Is a Natural Monopoly

question 71

Multiple Choice

The rail system in Metropolis is a natural monopoly.If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?

• A)Profit will be zero under regulation.
• B)Only normal profit will be earned under regulation.
• C)Accounting profit will be zero under regulation.
• D)Economic loss will occur under regulation.
• E)Profit will be higher than if the monopoly were unregulated.

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