Price regulation of a natural monopoly may require subsidies.
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, and therefore the firm would need a government subsidy to overcome losses.
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One way a company can cover its costs and, at the same time, obey a marginal cost pricing rule is by
A) choosing output levels according to the profit-maximizing rule. B) using price discrimination. C) increasing production. D) decreasing production. E) decreasing its marginal cost but not changing its average total cost.
When only a small number of producers compete with each other is a defining characteristic of
A) inelastic supply. B) monopolistic competition. C) efficient competition. D) oligopoly.