If a natural monopoly is forced to follow a policy of average-cost pricing, the monopolist will:
A. earn economic profits less than zero.
B. charge a higher price than if not regulated.
C. charge the same price as if it were not regulated.
D. increase output to an amount greater than what it would have produced if it were not regulated.
Answer: D
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A) use the concept of opportunity costs. B) must use the ceteris paribus assumption. C) answer the "what" question. D) answer the "how" question. E) must use normative statements.
When a competitive equilibrium is achieved in a market
A) the total net benefit to society is maximized. B) the total benefits to consumers are equal to the total benefits to producers. C) economic surplus equals the deadweight loss. D) all individuals are better off than they would be if a price ceiling or price floor was imposed by government.