Macland’s Power company is a natural monopoly. Its regulators have given Macland’s Power the price it can charge for the next five years with the fourth and fifth year’s price declining by 5%. After five years, Macland can renegotiate the price. What method are the regulators using to control this natural monopoly?
a. Cost plus regulation
b. Price equals average total cost regulation
c. Price cap regulation
d. Cost elasticity mark up
c. Price cap regulation
You might also like to view...
Comparing a perfectly competitive market to a single-price monopoly with the same costs, we see that
A) both markets are equally efficient in their use of resources. B) the monopoly market always is more efficient in the use of resources. C) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not. D) the monopoly market achieves efficiency in resource use while perfectly competitive market does not. E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible.
If a new seller enters a market to compete with an existing natural monopoly, it will:
A) decrease the costs for both the sellers. B) increase the costs of production for both the sellers. C) increase the production costs for the existing seller, and a decrease in the costs for the new entrant. D) decrease the production costs for the existing seller, and an increase in the costs for the new entrant.
What is the most likely effect of the development of cell phones (many use this for time also) on the watch industry?
a. Increased price elasticity of demand for the watch industry because cell phones are complements b. decreased price elasticity of demand for the watch industry because cell phones are complements c. Increased price elasticity of demand for the watch industry because cell phones are substitutes d. decreased price elasticity of demand for the watch industry because cell phones are substitutes
A monopolist is not guaranteed positive economic profits solely because it is a monopoly since there may be no output for which
A. MC = MR. B. TR = TVC. C. TR > TC. D. ATR < MR.