How should a natural monopoly be regulated under the social interest theory of regulation?
A) by setting price equal to the average cost of production
B) by allowing a price that maximizes the profit of the natural monopoly
C) by using a marginal cost pricing rule
D) by subsidizing other producers to compete with the monopoly
E) by using rate of return regulation
C
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Aggregate demand ________ if the expected inflation rate increases because ________
A) increases; people expect to receive cost of living raises as the inflation begins B) does not change; inflation does not affect the aggregate demand curve C) increases; people want to make purchases now before the price of goods and services begin to increase D) decreases; people wait for the exchange rates to change before making purchases E) decreases; people want to wait for the price of goods and services begin to decrease
The monopolist faces the market demand curve
a. True b. False Indicate whether the statement is true or false
When many banks choose to hold excess reserves, ______________ monetary policy may not work well.
a. tight b. free c. expansionary d. contractionary
Which of the following will not cause aggregate private spending to decrease?
A) a reduction in expected future real interest rates B) a reduction in government spending C) an increase in future taxes D) all of the above E) none of the above