Question

A natural​ monopoly's output is less if it is regulated with

A.

a marginal cost pricing rule than if it is unregulated.

B.

a marginal cost pricing rule than if it is regulated with an average cost pricing rule.

C.

an average cost pricing rule than if it is unregulated.

D.

an average cost pricing rule than if it is regulated with a marginal cost pricing rule.

E.

More information about the​ firm's demand is needed to determine how its output depends on what regulation it faces.

When a rent−seeking equilibrium is​ reached, the

A.

economic profit is eliminated.

B.

economic profit is maximized.

C.

consumer surplus is eliminated.

D.

consumer surplus is greater than without rent seeking.

E.

economic profit is eliminated by legislation.

Answer 1

1)Option D is correct. In a monopoly output will be less when there is an average cost pricing rule as compared to when there is marginal cost pricing rule. Marginal cost cuts average cost from below and since average cost is above marginal cost when it'll cut demand curve out put will always be lesser than the output that will be produced when marginal cost cuts demand curve.

2) option A is correct.

Economic profit is eliminated when a rent seeking equilibrium is reached.