In the above figure, if the natural monopoly is regulated with a marginal cost pricing rule, then the deadweight loss to society is
A) zero.
B) ecf.
C) gde.
D) efcb.
A
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Suppose the CPI does indeed overstate the inflation rate. When the CPI increases by 5% and household incomes increase by 5%, we should conclude that real incomes of households have:
A. increased more slowly than has inflation. B. increased. C. decreased. D. stayed constant.
Describe, in general terms, the lags in the effects of monetary policy on interest rates, output, and prices. Be sure to note how long it takes each variable to respond to policy changes
What will be an ideal response?
Expansionary monetary policy will
a. often raise real interest rates in the short run. b. generally reduce aggregate demand in the short run. c. lead to higher nominal interest rates if the expansionary policy persists over a lengthy time period. d. lead to a rapid growth of real GDP if the expansionary policy persists over a lengthy time period.
When a low-income nation improves its institutions, so that growth results, one reason the growth may be more rapid than would result from a similar improvement in a developed nation that brings the same amount of added capital per worker to each nation, is that
a. adding capital has constant returns to scale, rather than diminishing returns, in each nation. b. with diminishing returns to scale, and with richer nations starting with more capital per unit labor, the added capital produces smaller increments to production in the higher-income nations. c. wage rates are lower in the low-income nation, and lower-income workers are more productive. d. capital is always more productive in lower-income nations.