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Author Question: If Michigan's electric utilities were allowed to use marginal cost pricing, it would lead to ... (Read 66 times)

Hungry!

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on: Jun 29, 2018
If Michigan's electric utilities were allowed to use marginal cost pricing, it would lead to economic profits for these utilities. Is the previous statement correct or incorrect? Explain your answer.
 
  What will be an ideal response?

Question 2

The used car market has a significant amount of adverse selection because
 
  A) the seller knows more about the car than the buyer.
  B) the buyer can easily find out more about the car than the seller.
  C) buyers and sellers rarely have enough information.
  D) the transaction costs of the used car market are prohibitive.


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marict

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

The statement is incorrect. Imposing marginal cost pricing on natural monopolies results in the firms incurring economic losses not economic profits.

Answer to Question 2

A


Hungry!

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Reply #2 on: Jun 29, 2018
Thank you :)


marict

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Reply #3 on: Jun 29, 2018
Happy to help you


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