What is the drawback of forcing a natural monopolist to use a marginal cost pricing rule?
A) No deadweight loss is eliminated.
B) The firm will incur an economic loss.
C) The gain in consumer surplus will be less than the loss in producer surplus, thus creating additional deadweight loss.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

Forcing a natural monopolist to use marginal cost pricing can lead to economic losses because the price may be below average total cost, which is necessary for covering all costs in the long run.

What Is the Drawback of Forcing a Natural Monopolist to Use