The government of your state wants Gigantic Software Corp, which is a natural monopoly, to stay in business yet still produce where price equals marginal cost. The government might choose to
a. set a price ceiling 10 percent lower than its previous level
b. impose a tax on the company for each dollar of sales
c. establish regulations that raise the company's cost of doing business
d. provide a subsidy to the company to cover the loss and ensure a normal profit
e. replace the company's top management
D
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A consumer's willingness to pay:
A. is the maximum price that a buyer would be willing to pay for a good or service. B. is the minimum price that a buyer would be willing to pay for a good or service. C. is his or her reserved minimum bid-price. D. must always equal the seller's willingness to sell.
Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand increases from D0 to D1, in the short run:
A. market price rises from P0 to P1 and the firm's output rises from q0 to q1. B. market price remains at P0 because perfectly competitive firms can't earn positive economic profit. C. the firm's output remains at q0 because perfectly competitive firms can't earn positive economic profit. D. market price rises from P0 to P1 and the firm's output rises from Q0 to Q1.