If a natural monopoly does not inflate its costs, the output it produces is the smallest when the monopoly is
A) left unregulated.
B) regulated according to an average cost pricing rule.
C) regulated according to a marginal cost pricing rule.
D) regulated to maximize total surplus.

Question

Quizplus · Accepted Answer

When a natural monopoly is left unregulated, it tends to produce less output to maximize its profits compared to when it is regulated under any pricing rule.

If a Natural Monopoly Does Not Inflate Its Costs, the Output