Does the monopolist have an incentive to reduce cost under ...

[panfilo]

Does the monopolist have an incentive to reduce cost under average cost pricing? How can this be overcome?

Question 2

The exchange rate that is established in the absence of foreign exchange market intervention by the government is known as a(n):
 a. historical anachronism.
  b. fixed exchange rate.
  c. dirty float exchange rate.
  d. unmanaged exchange rate.
  e. free market equilibrium exchange rate.

[upturnedfurball]

Answer to Question 1

Under average cost pricing, the monopolist has no incentive to reduce costs. Regulators have tackled this problem by allowing the regulated firm to keep some of the profits that come from lower costs. In other words, they do not adhere strictly to average cost pricing.

Answer to Question 2

e

[panfilo]

TYSM

[FergA]

Excellent