When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly
A)will experience positive profit.
B)will experience a price above average total cost.
C)does not need a government subsidy to remain in business.
D)will experience a loss.

Question

Quizplus · Accepted Answer

Marginal-cost pricing for a natural monopoly often results in prices that are below the average total cost, leading to losses for the monopoly. This is because the natural monopoly's average total cost curve is typically decreasing due to economies of scale.

When Regulators Use a Marginal-Cost Pricing Strategy to Regulate a Natural