Marginal cost pricing is a regulatory method that stipulates that the firm charge a price equal to
A)deadweight loss.
B)marginal cost.
C)average cost.
D)marginal revenue.
E)fixed cost.

Question

Quizplus · Accepted Answer

Marginal cost pricing mandates that the firm charges a price equal to the incremental cost of producing one additional unit to maximize social welfare and output efficiency. It ensures that the firm does not have any economic profits by only earning enough to cover their production expenses. This method is typical in regulated industries, such as utilities and transportation, where the regulators set the prices to protect the consumers' interests.

Marginal Cost Pricing Is a Regulatory Method That Stipulates That