Author Question: Refer to the above figure. Suppose the government requires the natural monopolist to charge the ... (Read 115 times)

123654777 · **on:** Jun 29, 2018

Refer to the above figure. Suppose the government requires the natural monopolist to charge the efficient price. Then profits for the firm will be

A) zero.
B) losses equal to Q4 times distance f-g.
C) losses equal to Q3 times distance d-e.
D) profits equal to Q1 times distance a-b.

Question 2

Explain briefly what will likely happen to society if it chooses to produce more capital goods and fewer consumption goods.

What will be an ideal response?

ynlevi · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

Because capital goods enable society to produce larger quantities of consumption goods, giving up some consumption goods in exchange for more capital goods today will result in larger production of consumption goods in the future.