Suppose, a regulatory agency overseeing a natural monopoly wants to secure consumers a low price without subsidy, while at the same time sustain the firm at zero economic profit. What can the agency do?
a. Set price equal to marginal cost.
b. Set marginal revenue equal to marginal cost, and set price based on the demand curve.
c. Set price equal to zero.
d. Set price equal to average cost.
d
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Absolute advantage is determined by
A) actual differences in labor productivity between countries. B) relative differences in labor productivity between countries. C) Both A and B. D) Neither A nor B.
To compute the CPI, the Bureau of Labor Statistics (BLS) compiles a "basket of goods" that ________; each price in the index is weighted by ________
A) are produced in the United States; an expenditure survey B) the average farmer produces; how long it takes for the particular good to reach the market C) the average urban consumer buys; the quantity of the good that goes into the basket D) only members of congress purchase; a "luxury" score E) is typical of consumers below the poverty line; the perceived quality of the good
Explain briefly the following concepts:
(a) Increasing returns to scale. (b) Decreasing returns to scale. (c) Constant returns to scale
High and variable rates of inflation will
a. distort the information delivered by market prices. b. encourage people to spend more time producing and less time trying to protect their wealth. c. decrease the risks that accompany the undertaking of long-term investment projects. d. promote economic growth and the efficient use of resources.