At a Level of Output When Regulators Require a Natural

question 24

Multiple Choice

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost,the firm

• A) makes zero economic profit.
• B) makes an economic profit.
• C) incurs an economic loss.
• D) makes a normal-economic profit.
• E) makes either zero economic profit or an economic profit, depending on whether the firm's average total cost equals or is less than its marginal cost.

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Definitions:

Implicit Cost

The opportunity cost associated with a firm's use of resources that it already owns, representing the income the firm foregoes by using these resources in its current capacity.

Total Revenue

The total amount of money received by a company from sales of its products or services, before any expenses are subtracted.

Linear

Pertaining to a relationship or equation that can be graphically represented in a straight line, indicating a constant rate of change.

Upward-Sloping

Describes a line or curve on a graph that increases in height as it moves from left to right, often used to represent the increase in price with an increase in quantity supplied.