Suppose that a regulatory agency has imposed marginal cost pricing on a natural monopolist. We expect that
A. the firm will rise its price above marginal cost.
B. the firm will earn only a normal profit.
C. the firm will earn economic losses.
D. the firm's average total cost of production is rising over the relevant range of production.
Answer: C
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To compare the purchasing power of nominal wages in two different years, one must:
A. deflate both quantities by a common price index. B. adjust both quantities by the real interest rate. C. increase both quantities by the same percentage increase in a price index. D. compare the nominal values.
Bank X had a reputation for asking few questions when it provided loans. Five years later, the majority of the loans were not repaid. This is because the bank had failed to address the
A) moral hazard problem. B) free-rider problem. C) contrary selection problem. D) adverse selection problem.
In the circular flow diagram, aggregate expenditure includes
A) consumption expenditure, saving, investment and government expenditure. B) consumption expenditure, saving, investment and net exports. C) consumption expenditure, investment, government expenditure and net exports. D) consumption expenditure, saving, government expenditure and net exports.
An increase in the prison population would tend to cause, other things the same, a decrease in ________
A) federal disabilities benefits B) the use of temporary workers C) the college premium D) the natural rate of unemployment