Under rate-of-return regulation, natural monopolies must use

Resource use is allocatively efficient when

A) we produce the goods with the highest opportunity cost. B) we produce the goods with the lowest opportunity cost. C) we cannot produce more goods and services. D) we produce the amount of the different goods we value most highly.

Since the Red Cross supplies 95 percent of the blood in the United States, it can be considered a monopolist. Assume that it, in fact, operates like a monopolist. The Red Cross currently charges hospitals and other users $21 for a pint of blood. In order to increase the supply of blood, the government offers the Red Cross a $10 million, lump-sum subsidy. How much more blood supply will the

subsidy generate? a. about 500,000 pints b. somewhere between 100,000 and 500,000 . depending on demand elasticity c. somewhere between 100,000 and 500,000 . depending on the elasticity of supply d. zero