50) Government regulation of a natural monopoly causes its average cost curve to shift downward. 51) 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. 52) The average-cost pricing policy provides a greater incentive for a regulated monopolist to reduce its production cost. 53) Compared with average cost at the quantity that an unregulated monopolist would choose average costs are higher at the quantity chosen by a monopoly facing an average-cost pricing policy. 54) When demand falls the price charged by a monopoly under an average-cost pricing policy will fall. 55) Suppose an unregulated monopoly faces a negatively-sloped and steep average cost curve. If a second firm enters what will happen to the first firm’s demand and average cost of production? 56) What is the disadvantage of average-cost pricing? 57) Why can’t the government force a natural monopolist to produce the competitive output? 8.9 Antitrust Policy 1) Which of the following is NOT a form of antitrust policy? A) regulation of business practices B) blocking mergers C) breaking up monopolies D) a price control 2) The purpose of antitrust policy is to A) promote competition among firms. B) increase profits to firms. C) protect domestic firms from foreign trade. D) achieve scale economies in production.
