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Chapter 22: Problem 23

Which is the most accurate statement? (LO6) a) The rationale for natural monopoly has been strengthened by deregulation. b) Your local phone and electric companies will probably continue to be monopolies for at least another 50 years. c) Deregulation and competition tend to lower costs. d) Natural monopoly never had any economic basis.

Short Answer

Expert verified
The most accurate statement is: c) Deregulation and competition tend to lower costs.

Step by step solution

01

Option a: The rationale for natural monopoly has been strengthened by deregulation.

We first need to understand the rationale for a natural monopoly. A natural monopoly occurs when economies of scale make it more efficient for a single provider to supply a good or service. Deregulation is the process of reducing restrictions on businesses to promote competition. So, if deregulation strengthened the rationale for natural monopoly, it would suggest that deregulation made it more efficient for a single provider to supply the good or service. However, this statement is not accurate, as deregulation usually promotes competition and reduces the power of monopolies.
02

Option b: Your local phone and electric companies will probably continue to be monopolies for at least another 50 years.

Although this statement may have some truth in it for certain companies in specific regions, it is impossible to accurately predict the economic landscape 50 years from now. Advancements in technology, policy changes, and various other factors could potentially change the status of local phone and electric companies.
03

Option c: Deregulation and competition tend to lower costs.

This statement is accurate. When a market is deregulated and competition is allowed to flourish, companies are motivated to find ways to lower their costs in order to maintain competitive prices and attract customers. This statement correctly reflects the relationship between deregulation, competition, and costs in a market.
04

Option d: Natural monopoly never had any economic basis.

This statement is not accurate. As mentioned earlier, natural monopolies emerge due to economies of scale that allow a single provider to supply a good or service more efficiently than multiple competing providers. This concept is well established in economic theory. Based on the analysis above, the most accurate statement is: c) Deregulation and competition tend to lower costs.

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Most popular questions from this chapter

Which statement is true? (LO2) a) The monopolist and the perfect competitor both produce where \(\mathrm{MC}\) equals MR. b) Neither the monopolist nor the perfect competitor produce where MC equals MR. c) The monopolist, but not the perfect competitor, produces where \(\mathrm{MC}\) equals MR. d) The perfect competitor, but not the monopolist, produces where \(\mathrm{MC}\) equals MR.

Which statement is true? (LO1) a) All monopolists' products have close substitutes. b) Most firms in the United States are monopolies. c) There are no monopolies in the United States. d) A monopoly is a firm that produces all the output in an industry. e) None of these statements is true.

Which statement is true about economic profit in the long run? (LO2,3) a) Both the monopolist and the perfect competitor make one. b) Neither the monopolist nor the perfect competitor makes one. c) Only the perfect competitor makes one. d) Only the monopolist makes one.

Which statement is true? (LO7) a) The monopolist is just as driven as the competitive firm to control costs and use resources efficiently. b) The monopolist often charges his customers higher prices and provides poorer service than he would if he had competitors. c) Growing foreign competition has had no effect on the quality of American products. d) None of these statements is true.

Each of the following is true about Walmart EXCEPT that (LO8) a) it is the largest employer in the United States b) it is the largest company in the world c) it pays its employees, on average, about the same as its competitors d) it drives hard bargains with suppliers and passes along the savings to its customers
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