If regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality of service will
A) increase rapidly.
B) likely fall.
C) remain unchanged.
D) none of the above.
Answer: B
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According to the theory of purchasing power parity, in the long run
A) the nominal exchange rate should equal the domestic inflation rate. B) the domestic inflation rate should equal the foreign inflation rate. C) the real exchange rate should equal 1. D) the real exchange rate should equal the domestic inflation rate divided by the foreign inflation rate.
The government protects rights in a market economy by providing national defense, a court system, and a well-functioning political system
a. True b. False
Whenever there is a difference in the same exchange rate offered in two markets, an arbitrageur would:
a. wait for the markets to come to equilibrium. b. buy in the market where the currency is offered at the cheaper rate,and simultaneously sell the currency where the rates are higher. c. sell the cheaper-rate currency in the home market. d. not consider the trade, since prices would undoubtedly change before it could be executed.
Crowding out occurs when
A) investment increases as government spending falls. B) investment increases when government spending rises. C) investment decreases when government spending falls. D) investment decreases when government spending rises.