If the Regulator Institutes Average-Cost Pricing in a Natural Monopoly

question 21

Multiple Choice

If the regulator institutes average-cost pricing in a natural monopoly market, then:

• A) the firm makes zero economic profit.
• B) the firm has an incentive to produce at minimum cost.
• C) the marginal benefit to the consumer is less than marginal cost to the firm.
• D) firms in the market will produce at the efficient level.
• E) consumer surplus in the market is maximized.

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Definitions:

Decay Theory

The oldest theory of forgetting, which holds that memories, if not used, fade with time and ultimately disappear altogether.

Encoding Failure

is a failure to process and store information into memory, leading to its unavailability for later retrieval.

Interference

A cause of forgetting that occurs because information or associations stored either before or after a given memory hinder the ability to remember it.

Consideration Failure

An oversight or neglect in thoroughly thinking through or regarding all aspects and consequences of a decision or action.