An average cost pricing rule for a natural monopoly sets the price _______ the marginal cost, thereby _______ a deadweight loss.
A) below; creating
B) above; creating
C) below; avoiding
D) above; avoiding

Question

Quizplus · Accepted Answer

An average cost pricing rule for a natural monopoly sets the price above the marginal cost, which can lead to inefficient consumption and create a deadweight loss because some consumers who value the product more than its marginal cost but less than its price will not buy it.

An Average Cost Pricing Rule for a Natural Monopoly Sets