11) For the regulated natural monopoly, an average cost pricing : 1418014
11) For the regulated natural monopoly, an average cost pricing rule sets price equal to
A) marginal cost.
B) total fixed cost.
C) average variable cost.
D) average fixed cost.
E) average total cost.
12) A price cap is a price ________. A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation ________.
A) ceiling; a firm incurs an economic loss
B) floor; price is set equal to marginal cost
C) ceiling; the firm's managers have an incentive to inflate costs
D) floor; the firm's managers have an incentive to purchase more than the efficient quantity of capital
E) floor; the firm's managers have an incentive to inflate costs
13) An average cost pricing rule sets ________ equal to average total cost. An average cost pricing rule is not an efficient way of regulating monopoly because at the quantity produced ________.
A) price; marginal benefit exceeds marginal cost
B) the return on capital; marginal benefit exceeds marginal cost
C) marginal cost; marginal cost exceeds marginal benefit
D) price equal to marginal revenue, which in long-run equilibrium is; marginal cost exceeds marginal benefit
E) marginal cost; marginal benefit exceeds marginal cost
14) Social interest theory predicts that the political process will seek to minimize
A) producer surplus.
B) consumer surplus.
C) total surplus.
D) deadweight loss.
E) average total cost.
15) The capture theory holds that regulations are supplied to maximize ________.
A) total sales
B) economic profit
C) marginal product
D) consumer surplus
E) marginal revenue
16) Under a marginal cost pricing rule, a regulated natural monopoly
A) makes an economic profit and a deadweight loss arises.
B) makes an economic profit with no deadweight loss.
C) incurs an economic loss with no deadweight loss.
D) incurs an economic loss and a deadweight loss arises.
E) breaks even.
17) Regulation of a natural monopoly will maximize the sum of consumer surplus and producer surplus if the firm is regulated with
A) an average cost pricing rule.
B) a rate of return regulation.
C) a price cap.
D) capture theory.
E) a marginal cost pricing rule.