Marginal cost pricing implies a loss on every unit of output produced by natural monopoly.
Answer the following statement true (T) or false (F)
True
If naturally monopolistic firms are required to charge P = MC (price efficiency), economic profits will be negative because MC is below ATC over the relevant range of output for a natural monopoly.
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Adoption of a guaranteed annual income with benefits (B) given by B = 20,000 -.5 (earnings) would be expected to reduce work effort by low wage workers because:
a. the income effect would outweigh the substitution effect of the plan. b. the substitution effect would outweigh the income effect of the plan. c. both substitution and income effects would operate to reduce work effort. d. the plan would make working financially unattractive.
External debt rises from 5 percent of GDP to over 30 percent of GDP. This increase in external debt is:
A. a potential problem because government debt is no different from the debt of individuals. B. not a potential problem because government debt differs from the debt of individuals. C. a potential problem because repayment implies a net reduction in the income of an average citizen. D. not a potential problem because repayment does not imply a net reduction in the income of an average citizen.