What is the meaning of the phrase "dilemma of regulation"?
A. Natural monopolies achieve economies of scale but charge high prices when there is no government regulation; government regulation reduces prices but results in diseconomies of scale.
B. The competitive price achieves allocative efficiency but may produce economic losses; the normal profit price yields a normal profit but may not be allocatively efficient.
C. The normal profit price achieves allocative efficiency but may produce economic losses; the competitive price yields an economic profit but may not be allocatively efficient.
D. Natural monopolies are profitable but only if the government permits price discrimination; government regulation to restrict price discrimination reduces monopoly prices, but the regulation also reduces monopoly output.
Answer: B
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Private disposable income equals
A) GNP - taxes + transfers + interest. B) NNP - taxes + transfers + interest. C) national income - taxes + transfers + interest. D) national income - taxes - transfers + interest.
If the rate of inflation in Country A is higher than in Country B, then ________
A) in nominal terms, country A's currency should depreciate B) in nominal terms, country B's currency should depreciate C) the law of one price will not hold D) purchasing power parity does not apply