If an average cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will
A) incur an economic loss.
B) make zero economic profit, that is, its owners make a normal profit.
C) make an economic profit of $4 million.
D) make an economic profit of $9 million.

Question

Quizplus · Accepted Answer

An average cost pricing rule allows the firm to cover its total costs, including a normal profit, resulting in zero economic profit.

If an Average Cost Pricing Rule Is Imposed on the Natural