Which of the following is true when regulators require a natural monopolist to set price equal to marginal cost?
A)This policy results in a less than socially optimal allocation of resources.
B)The marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit.
C)The monopolist will face recurring losses unless a subsidy is provided.
D)The monopolist will earn a normal profit.
E)The monopolist will earn more than a fair return.

Question

Quizplus · Accepted Answer

When price is set equal to marginal cost, the monopolist may not cover its average total costs, leading to losses unless subsidized.

Which of the Following Is True When Regulators Require a Natural