"A single-price natural monopoly that is regulated to set price equal to marginal cost incurs an economic loss." True or false? Explain
What will be an ideal response?
The statement is true. A natural monopoly's average cost is falling as its output increases. This means that marginal cost is below average cost. Because price equals marginal cost, price is less than average cost so that the firm incurs an economic loss.
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Currently Belize, a country in Central America, has a small coffee industry but does not export any coffee
Suppose the government of Belize, in order to protect the new coffee industry to enable it to grow into a mature industry that can compete in world markets, places a tariff on the importation of coffee. What is the argument that has been used to support the tariff on coffee? A) the infant-industry argument B) the dumping argument C) protection of Belize coffee workers D) to prevent rich countries from exploiting developing countries
Robert Nozick asserts that fairness and efficiency result if
A) there are price ceilings in the market. B) there are external benefits and external costs in the market. C) voluntary exchange occurs. D) public goods are provided by government.