Author Question: In a natural monopoly, throughout the range of market demand, a. marginal cost exceeds average cost ... (Read 95 times)

JGIBBSON · **on:** Jun 30, 2018

In a natural monopoly, throughout the range of market demand,
a. marginal cost exceeds average cost and therefore pulls average cost upward
b. average cost exceeds marginal cost and therefore pulls marginal cost upward
c. marginal cost is below average cost and therefore pulls average cost downward
d. average cost is equal to marginal cost
e. there are diseconomies of scale

Question 2

The Hound Dog Bus Company contemplates expanding its Virginia operations by offering service from Fairfax to Arlington. The total cost of the trip would be 120, of which 50 is fixed cost, which it has already paid. The firm expects to earn 60 in revenue from the trip. The Hound Dog Bus Company should
a. offer this service because it will earn a positive economic profit
b. not offer this service because the marginal revenue is less than the marginal cost
c. offer this service because the revenue exceeds fixed cost
d. not offer this service because the total cost exceeds the total revenue
e. offer this service because the added revenue exceeds the added cost of this service