Question

q1 . Which of the following is true regarding regulating natural monopolies?

A. Subsidies are never needed in order to encourage the regulated firm to produce the good.

B. Price can be set equal to the average total cost.

C. The government should never own and operate the regulated monopolist.

D. The regulated monopolist should be taxed in order to get the firm to achieve the efficient outcome.

q2 . Which of the following is true with regard to monopoly?

A.There is no deadweight loss associated with a monopoly outcome.

B. A monopolist charges a price where marginal cost is equal to marginal revenue.

C. A monopolist would never engage in rent seeking.

D. Government oversight of monopolies should never be encouraged.

Answer 1

q1) "B"

IN the market, the government can set the price equal to the average total cost, the monopoly will operate at that price even in the long run. If price I below the ATC subsidies will be needed.

q2) "B"

A monopoly will produce at the point where the MR and the MC are equal. They will charge the price accordingly at the demand curve.