If a natural monopoly is regulated using
A) a marginal cost pricing rule, the firm maximizes its profit.
B) an average cost pricing rule, the firm incurs an economic loss.
C) a total cost pricing rule, the firm will exit the industry.
D) a marginal cost pricing rule, the firm incurs an economic loss.
E) an average cost pricing rule, the firm maximizes its profit.
D
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Suppose there is an increase in the money supply, but that people's demand for money balances increases by a greater amount at the same time. The net effect would be
A) lower interest rates, greater real GDP, and a higher price level as aggregate demand increases because of the indirect effect of the increase in the money supply. B) no change in aggregate demand or aggregate supply. C) a lower price level in the long run. D) an increase in aggregate demand due to the increase in the money supply, but a decrease in aggregate supply due to the increase in the demand for money.
For a normal good, the income and substitution effect work in the same direction. For an inferior good, the income and substitution effects work in opposite directions
Does this imply that the demand curve for an inferior good is upward sloping? Explain.