A natural monopoly regulated with an average cost pricing rule is
A) efficient and incurs an economic loss.
B) inefficient and makes zero economic profit.
C) inefficient and makes an economic profit.
D) efficient and makes zero economic profit.

Question

Quizplus · Accepted Answer

A natural monopoly regulated with an average cost pricing rule is inefficient because it does not produce at the lowest possible cost, and it makes zero economic profit as prices are set to cover average costs, including normal profit.

A Natural Monopoly Regulated with an Average Cost Pricing Rule