Author Question: Suppose that the only maker of a particular type of horse hair clothing exits the industry because ... (Read 53 times)

madam-professor · **on:** Jun 30, 2018

Suppose that the only maker of a particular type of horse hair clothing exits the industry because demand is too low. The correct analysis of this situation is that
a. the producer's decision is irrational, since monopolies are not limited by the demand curve
b. the producer's decision is irrational, since monopolies never go out of business
c. the producer's decision is irrational, since it could simply raise the price
d. the price received by the producer was lower than the marginal cost in the long run
e. the price received by the producer was lower than the average total cost in the long run

Question 2

When regulating a natural monopoly, the regulating agency should set price equal to marginal cost.
a. True
b. False