In Figure 27.2, profit regulation will lead the natural monopoly to produce
A. QB and charge PB.
B. QC and charge PD.
C. QA and charge PA.
D. QC and charge PC.
Answer: A
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Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted.ProcessABCDE(smoke/day)(4 tons/day)(3 tons/day)(2 tons/day)(1 tons/day)(0 tons/day)Cost to Industrio ($/day)$350$400$500$700$1,000Cost to Capitalista
($/day)$225$250$290$400$600 Suppose the government decides to auction 6 permits. The government conducts the auction by starting at a price of $1 and asking how many permits each firm wants to buy at that price. If the total is more than 6, it raises the price by $1 and asks again until the total quantity demanded falls to 6. Under this system, each permit will sell for ________ with Industrio buying ________ and Capitalista buying ________. A. $51; 4; 2 B. $31; 2; 4 C. $101; 3; 3 D. $41; 4; 2
Producers try to sell goods that are ______.
a. worth more to them than to the purchaser b. worth an equal amount to them as the asking price c. worth less to them than the asking price d. worth more to them than the asking price
The slope of the aggregate supply curve increases as output increases because
A. the cost of resource use increases as potential is reached. B. consumers are willing to pay more as output expands. C. firms substitute capital for labor as prices increase. D. firms substitute capital for labor as capacity is reached.
If the price of good X increases, what will happen to the budget line?
A. It will become steeper. B. It will shift outward. C. It will shift inward. D. It will become flatter.