Which of the Following Is a Criticism of Average-Cost Pricing

question 34

Multiple Choice

Which of the following is a criticism of average-cost pricing as a regulatory response to a natural monopoly?

• A) With average-cost pricing, output produced is smaller than the efficient level of output.
• B) Firms that practice average-cost pricing suffer persistent losses.
• C) Imperfect information about the firm's costs reduces the effectiveness of average-cost pricing.
• D) Under average-cost pricing, the market price is lower than the efficient price.
• E) Answers with average-cost pricing, output produced is smaller than the efficient level of output and imperfect information about the firm's costs reduces the effectiveness of average-cost pricing are both correct.

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Definitions:

Spontaneous Recovery

The reappearance of a learned response after extinction has occurred and time has passed, in classical conditioning.

Time Lapse

A photographic technique that captures a sequence of frames at set intervals to show changes that take place slowly over time.

Generalization

The process of forming general statements or conclusions from specific instances.

Extinguished CR

In classical conditioning, this refers to the gradual weakening and eventual disappearance of the conditioned response when the conditioned stimulus is repeatedly presented without the unconditioned stimulus.