Price is the only rationing device that can be used in a modern economy

If a natural monopoly is told to set price equal to average cost, then the firm

A) is not able to set marginal revenue equal to marginal cost. B) automatically also sets price equal to marginal cost. C) will make a substantial economic profit. D) will incur an economic loss. E) sets a price that is lower than its marginal cost.

In Figure 9-13, assume the initial equilibrium at point A is disturbed by an increase in demand. If long-run equilibrium is established at point C, this is a(n)

a.
constant cost industry
b.
increasing-cost industry
c.
decreasing-cost industry