Under an average cost pricing rule, a regulated natural monopoly _______ and there is _______ .
A) makes zero economic profit; a deadweight loss.
B) makes zero economic profit; no deadweight loss
C) incurs an economic loss; no deadweight loss
D) makes an economic profit; a deadweight loss

Question

Quizplus · Accepted Answer

Under an average cost pricing rule, a regulated natural monopoly is allowed to set prices where average cost equals demand, leading to zero economic profit. However, this does not ensure allocative efficiency, resulting in a deadweight loss.

Under an Average Cost Pricing Rule, a Regulated Natural Monopoly