Price cap regulation involves A) setting the monopoly's price ...

[dmcintosh]

Price cap regulation involves
 
  A) setting the monopoly's price equal to its average total cost.
  B) setting the monopoly's price equal to its profit-maximizing price.
  C) setting a maximum price the monopoly may charge.
  D) assuming a natural monopoly will not charge a higher than profit-maximizing price.
  E) setting the monopoly's price equal to its marginal cost.

Question 2

Refer to the scenario above. Suppose you decide to buy a Toyota Corolla. You value the car for 10,000. You don't know it, but the car dealer values it for 8,500. What is the minimum price that the seller would accept for the car?
 
  A) 8,500
  B) 7,000
  C) 10,000
  D) 5,000

[Anonymous]

Answer to Question 1

C

Answer to Question 2

A