It is unrealistic to regulate a natural monopoly at marginal cost pricing because
A) the government is not allowed to regulate markets.
B) marginal cost pricing ends up having the natural monopoly firm earn zero economic profits.
C) with this type of regulation,the firm will want to shut down,and that outcome is not desirable for society.
D) regulating a market causes more deadweight loss.
E) firms do not need to follow regulations from the government.

Question

Quizplus · Accepted Answer

Regulating a natural monopoly at marginal cost pricing can result in the firm's revenues being insufficient to cover its fixed costs, leading to a situation where the firm would prefer to shut down. This outcome is undesirable because natural monopolies often provide essential services that society needs.

It Is Unrealistic to Regulate a Natural Monopoly at Marginal