Recall the Application. The British Experience with water privatization showed that the di
Recall the Application. The British Experience with water privatization showed that the distribution of water is:
A) a natural monopoly.
B) best left as a deregulated market.
C) best set up as a trust.
D) a classic example of price fixing.
46) Recall the Application. The British Experience with water privatization showed that:
A) a single firm providing water will be profitable, but two firms will not.
B) two or more firms providing water will be profitable, but a single firm will not.
C) it does not matter how many firms provide water, as none will be profitable.
D) it does not matter how many firms provide water, as all will be profitable.
Recall the Application about the merger of Sirius Satellite Radio and XM Satellite Radio to answer the following question(s).
47) Recall the Application. One might expect no more firms to enter after the market consolidated into one firm because:
A) the fixed cost of setting up a company system and acquiring programing is very high.
B) the marginal cost of adding addition subscribers if very high.
C) demand is very elastic.
D) all of the above.
48) Recall the Application. After the merger of Sirius Satellite Radio and XM Satellite Radio, the new firm, Sirius XM, would be classified as a:
A) natural monopoly.
B) monopoly, but not a natural monopoly.
C) public utility.
49) Recall the Application. Sirius and XM proposed the merger because they were:
A) losing money because their fixed costs were very high.
B) losing money because they faced the advertisers' dilemma.
C) earning duopolists' profits that were greater than zero, but knew they could earn more as a single firm.
D) losing money because their variable costs were higher than the price they could charge.
50) In the case of a natural monopoly, two firms can produce at lower average cost than one firm can.
51) The conventional way to regulate a natural monopolist is to force it to charge a price equal to marginal cost.
52) A natural monopoly is inevitable if the entry of a second firm shifts the demand curve facing each individual firm entirely below the average cost curve.
53) Government regulation of a natural monopoly causes its average cost curve to shift downward.
54) Under the average-cost pricing policy, a regulated monopolist is guaranteed a normal economic profit even if there is a change in its cost of production.