Compare and contrast the marginal cost and average cost pricing rules for regulating natural monopolies
What will be an ideal response?
Marginal cost pricing sets the price equal to the marginal cost. It does so by determining the price using the intersection of the marginal cost curve and the demand curve. Marginal cost pricing results in an efficient level of output but the firm incurs an economic loss. Average cost pricing sets the price equal to the average cost. It does so by determining the price using the intersection of the long-run average cost curve and the demand curve. Average cost pricing results in an inefficient level of output and zero economic profit, that is, a normal profit.
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Firms that have several plants that produce the same or related products are said to be:
A) horizontally integrated. B) vertically integrated. C) conglomerates. D) cooperatives.
How can an MNE overcome its inherent disadvantages?
A. By producing more than two products in which it has comparative advantage B. By expanding its operation in more than two host countries C. By owning one or more assets that are not owned by its local competitors in the host country D. By borrowing funds from the host country rather than transferring funds from the parent firm