Why do government regulators not enforce marginal cost pricing for natural monopolies? What are the common regulatory solutions?
What will be an ideal response?
If government regulators enforce marginal cost pricing for natural monopolies, then the firms will face losses and eventually go out of business. Instead, the common regulatory solutions include allowing firms to charge a price that covers the average cost of production or to set a price that ensure a normal return on investment.
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Rationality in the household decision-making process means that
a. all households make the same decisions b. everyone in the household agrees on all decisions c. households act in their own best interests d. households want to earn as much income as possible e. all households would make the same decisions given the same information on products qualities and prices
If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal
a. True b. False Indicate whether the statement is true or false
If the government imposes a maximum price that is above the equilibrium price,
A. quantity demanded will be less than quantity supplied. B. demand will be greater than supply. C. this maximum price will have no economic impact. D. the available supply will have to be rationed with a non-price rationing mechanism.
Personal consumption expenditures consist of:
A. foreign plus domestic investments. B. foreign investments in the United States. C. household and individual purchases of services and durable and nondurable goods. D. domestic investments.