When a natural monopoly is regulated using a marginal cost pricing rule, what can you say about the firm's profit and the market's efficiency?
What will be an ideal response?
Using a marginal cost pricing rule, the monopoly is incurring an economic loss. However, there is an efficient quantity of output produced so that the market is efficient with no deadweight loss.
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At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context?
A) The monopolist should expand production. B) The monopolist should contract production. C) The profits of the monopolist are maximized. D) The profits of the monopolist are minimized.
Explain what is meant by market failure
What will be an ideal response?
The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)
a. budget line. b. indifference curve. c. production possibilities frontier. d. marginal cost curve.
From the perspective of an externality, most communities have zoning laws to:
A. raise government revenues. B. control external benefits. C. control external costs. D. encourage positive externalities.