The average cost for a typical electric-power-production firm is AC = 100 - 10Q + Q2 where Q is measured in billion kilowatt hours per day. At the current regulated price, consumers demand 4 billion kilowatt hours per day
Is this market a natural monopoly? If demand increases to 10 billion kilowatt hours, is this market a natural monopoly? Explain.
The firm enjoys economies of scale up to 5 billion kilowatt hours (kwhr) per day (Minimum AC). So, at 4 billion kwhr per day, the firm is a natural monopoly. At 10 billion kwhr per day, this firm is no longer a natural monopoly.
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A) more; more B) more; less C) less; more D) less; less
Suppose the production of VCRs can be represented by the following production function: q = L0.4 K0.4. Which of the following statements is TRUE?
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When promoting average cost pricing, regulators
A) include what they consider to be a normal rate of return on investment. B) encourage firms to produce at the output level where price equals marginal cost. C) fail to consider a return to investors, so regulated firms often have a hard time raising investment funds. D) inflate costs so much that price ends up as large as would prevail under unregulated monopoly.
The labor force participation rate for men is
A. greater than that of women but decreasing. B. greater than that of women and increasing. C. less than that of women. D. equal to that of women.