Use the following graph to answer the next question.
Suppose that this pure monopoly is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this industry, it should set the price at ________.
A. P1
B. P2
C. P3
D. 0
Answer: B
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Which of the following is NOT an example of private investment expenditure?
A) new houses built during the year B) using credit cards to purchase durable and nondurable goods C) new plants and equipment added during the year D) increases in inventories on goods produced during the year
Jerry is interested in purchasing a washing machine. The price of the machine is $500. The probability that the machine will break down is 20% every year
If the machine breaks down in the first year and Jerry holds a warranty, he receives a new washing machine worth $400 that year. If the machine breaks down after two years and he holds a warranty, he receives a new machine that is worth $300 after the second year. The price of a warranty for two years is $100. The market interest rate is 5%. Is buying the warranty a good investment for Jerry? Explain your answer. Show all the necessary calculations.
You like to sleep until 11:00 am during the semester. What is the opportunity cost of attending an 8:00 am class?
A) nothing, since you can go back to bed later B) sleep C) obtaining the notes from the 8:00 am class D) the money you spend on coffee to stay awake
An closest example of a risk-free security is
a. General Motors bonds b. AT&T commercial paper c. U.S. Government Treasury bills d. San Francisco municipal bonds e. an I.O.U. that your cousin promises to pay you $100 in 3 months