1.

Regulations that offer imperfect answers

Group of answer choices

Reflect the realistic choices that society must make between imperfect markets and imperfect government intervention.

Are options that should never be implemented.

Will always have costs greater than their benefits.

Are not consistent with utility maximization in the real world.

2.

An unregulated natural monopoly is most likely to

Group of answer choices

Produce where marginal cost equals price.

Charge a lower price than if the same product were produced in a competitive market because of the monopolist's greater technical efficiency.

Take advantage of the concept of marginal cost pricing.

Earn an economic profit.

3.

The long-run average total cost curve of a natural monopolist

Group of answer choices

Is U-shaped.

Falls continuously as more output is produced.

Reflects declining average fixed costs.

Reflects diminishing returns.

4.

When there is market failure

Group of answer choices

Government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost.

A laissez-faire approach is the best policy.

Government intervention is always beneficial.

Government intervention is beneficial only in the case of natural monopolies.

5.

In cost-benefit analysis, regulatory intervention can be justified if the

Group of answer choices

Intervention improves market outcomes, regardless of costs.

Value of government failure exceeds the value of market failure.

Economic cost of regulation exceeds the value of the improvements in government intervention.

Marginal benefit of regulation exceeds its marginal cost.