Consider a natural monopoly that is producing an output level such that it is experiencing decreasing returns to scale.If government policy requires the firm to set price equal to marginal cost,
A)the outcome will be allocatively inefficient and the firm will be incurring losses.
B)the outcome will be allocatively efficient and the firm will be earning zero profits.
C)the outcome will be allocatively efficient and the firm will be earning profits.
D)the outcome will be allocatively efficient and the firm will be incurring losses.
E)the outcome will be allocatively inefficient and the firm will be earning profits.

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The Answer of Consider a natural monopoly that is producing an output level such that it is experiencing decreasing returns to scale.If government policy requires the firm to set price equal to marginal cost,
A)the outcome will be allocatively inefficient and the firm will be incurring losses.
B)the outcome will be allocatively efficient and the firm will be earning zero profits.
C)the outcome will be allocatively efficient and the firm will be earning profits.
D)the outcome will be allocatively efficient and the firm will be incurring losses.
E)the outcome will be allocatively inefficient and the firm will be earning profits.

Consider a Natural Monopoly That Is Producing an Output Level