When regulators require that a natural monopoly sets price equal to average total cost:
a. it is said to be allowing a fair rate of return.
b. the firm earns a super normal profit.
c. the firm shuts down permanently.
d. the firm operates at the profit-maximizing level of output.
e. the firm shuts down temporarily.
a
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_____ is determined by subtracting exemptions and deductions from total income
a. Adjusted gross income b. Taxable income c. Tax base d. Disposable income
Refer to Figure 9.1. If the government establishes a price ceiling of $20, the resulting deadweight loss will be
A) $0. B) $20. C) $30. D) $300. E) $600.
Which statement best characterizes the second-best policy offered by a monopoly insurer when it can't observe the consumer's risk?
a. It is a single contract offering partial insurance at an intermediate price such that all types are served. b. It is a menu of contracts providing full insurance for the least risky types and partial insurance for higher risks. c. It is a menu of contracts providing full insurance for the riskiest type and partial insurance at lower prices for lower risks. d. The market breaks down since the monopolist cannot design contracts without observing each consumer's risk.
A good example of a price floor is:
a. rent controls on apartments in major cities. b. general admission tickets to concerts. c. the minimum wage law. d. food stamp regulations. e. rock concert tickets.