When regulating a natural monopoly, average cost pricing is usually used rather than marginal cost pricing because
A) average cost pricing allows the firm to earn a normal rate of return on investment, while marginal cost pricing leads to economic losses.
B) average cost pricing is more economically efficient than marginal cost pricing.
C) average cost pricing leads to lower profits than marginal cost pricing.
D) average cost pricing leads to a lower market price than marginal cost pricing.
Question 2
The adverse selection problem in international investment means
A) that those seeking funds for the riskiest projects are those most actively seeking the funds.
B) that the recipients of the funds may use the funds for other than the approved projects.
C) that government officials may demand higher than the usual amount of bribes.
D) those in the highest levels of government are the most dishonest.
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