Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production, we can conclude that

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

A) The regulated firm ends up earning an economic profit. B) Consumers pay too much for the product of the monopoly. C) This policy is a two-part tariff, which creates inefficiency. D) The taxes required to gain the revenue used as the subsidy result in a deadweight loss that subtracts from gains in efficiency which result from use of the marginal cost pricing rule. E) The regulated firm goes out of business if it is subsidized.

Fixing the insolvency problem caused by the Great Recession, the government was reluctant to infuse equity into financial institutions because:

a. It would transfer the problem to the government but may not solve the underlying causes. b. Equity infusions had to be funded, and the government already had a major debt problem. c.The government could be accused of nationalizing the U.S. financial system. d. All of the above.