Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would
a. cause the monopolist to operate at a loss.
b. result in a less than optimal total surplus.
c. maximize producer surplus.
d. result in higher profits for the monopoly.
a
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Suppose transactions costs are created by a principal-agent problem. If the objective is economic efficiency, who should be made liable for damages resulting from the interaction of the principal and the agent?
a. The principal should be liable for all damages. b. The agent should be liable for all damages. c. Liability for damages should be equally split between the principal and the agent. d. The assignment of liability is irrelevant according to the Coase Theorem.
Gamma has $30,000 of capital per worker, while Omega has $7,500 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will increase output ________ in Gamma compared to Omega, holding other factors constant.
A. less B. not at all C. more D. by the same amount
Producing where marginal revenue equals marginal cost is equivalent to producing where
A) average total cost equals average revenue. B) average fixed cost is minimized. C) total revenue is equal to total cost. D) total profit is maximized.
A tax that is imposed on an imported good is called a
A. government license. B. quota. C. tariff. D. patent.