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Author Question: There is a deadweight loss if a natural monopoly is regulated to use A) marginal cost pricing and ... (Read 172 times)

shenderson6

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on: Jun 29, 2018
There is a deadweight loss if a natural monopoly is regulated to use
 
  A) marginal cost pricing and if it is regulated to use average cost pricing.
  B) average cost pricing and if it is allowed to be unregulated and maximize its profit.
  C) marginal cost pricing and if it is allowed to be unregulated and maximize its profit.
  D) None of the above answers is correct.

Question 2

What is the difference between the short run and the long run?
 
  What will be an ideal response?


macybarnes

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

The short run is a time period so short that the firm cannot change the quantity of at least one factor of production, say plant size for a manufacturer or land for a farmer. The only way to increase output, therefore, is by combining more units of the variable factors of production with the fixed factor of production. The long run is a time period sufficiently long that a firm can change the quantity of all factors of production. In the long run, nothing is fixed so output can be produced with whatever combination of factors of production the firm chooses.


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