When regulating a natural monopoly, average cost pricing is usually used rather than marginal cost pricing because
A. average cost pricing leads to a lower market price than marginal cost pricing.
B. average cost pricing leads to lower profits than marginal cost pricing.
C. average cost pricing allows the firm to earn a normal rate of return on investment, while marginal cost pricing leads to economic losses.
D. average cost pricing is more economically efficient than marginal cost pricing.
Answer: C
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Which of the following refers to diminishing marginal returns?
A) The revenue of a cell phone manufacturer decreased when it increased its product price. B) The additional output produced in a firm decreased as more workers were hired. C) The profits of an entrepreneur increased substantially after he fired a few of his employees. D) The total output of a firm decreased as more workers were hired.
Which of the following is not a determinant of option premiums?
A) The volatility of the underlying stock B) The price of the underlying stock C) The time to expiration of the option D) All of the above are determinants of option premiums.
The best single indicator of a person's purchasing power over time is income
Indicate whether the statement is true or false
For which of the following medical goods or services is the income elasticity of demand likely to be largest?
a. emergency services after a car accident b. measles shots c. physical examinations for life insurance applications d. medical tests to diagnose specific symptoms e. face-lifts