It is difficult in a natural monopoly market for the firm to achieve both efficiency and zero economic profit simultaneously, even with regulation.

Question

It is difficult in a natural monopoly market for the firm to achieve both efficiency and zero economic profit simultaneously, even with regulation.
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Quizplus · Accepted Answer

In a natural monopoly, due to high fixed costs and economies of scale, any attempt to achieve allocative efficiency (where price equals marginal cost) would typically result in prices lower than average total costs, leading to losses (negative economic profits) for the firm. Regulation aimed at making the firm break even (zero economic profit) often results in prices above marginal cost, thus sacrificing allocative efficiency.

It Is Difficult in a Natural Monopoly Market for the Firm