If a Natural Monopoly Is Told to Set Price Equal

question 286

Multiple Choice

If a natural monopoly is told to set price equal to average cost,then the firm

• A) is not able to set marginal revenue equal to marginal cost.
• B) automatically also sets price equal to marginal cost.
• C) will make a substantial economic profit.
• D) will incur an economic loss.
• E) sets a price that is lower than its marginal cost.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.