Does the monopolist have an incentive to reduce cost under average cost pricing? How can this be overcome?
Under average cost pricing, the monopolist has no incentive to reduce costs. Regulators have tackled this problem by allowing the regulated firm to keep some of the profits that come from lower costs. In other words, they do not adhere strictly to average cost pricing.
You might also like to view...
The production function in Scenario 7.3 exhibits:
A) decreasing returns to scale. B) constant returns to scale. C) increasing returns to scale. D) all of the above at various levels of output.
U.S. exports involve an:
A. inflow of foreign currency from foreigners to the U.S. economy. B. outflow of dollars from the United States to foreigners. C. outflow of foreign currency from the United States to foreigners. D. inflow of dollars from foreigners to the U.S. economy.
A measure of the volatility of a variable is its
a. present value. b. future value. c. return. d. standard deviation.
Which of the following would cause the money supply in the United States to expand?
A. a decrease in reserve requirements B. an increase in the discount rate C. the sale of U.S. government bonds by a Federal Reserve bank D. an increase in the world supply of gold