Which of the following will be true if a regulator uses average-cost pricing to regulate a natural monopoly?
A)The natural monopoly will incur losses.
B)The output will be lower than that of an unregulated monopoly.
C)There will be an efficiency gain in the market.
D)The firm will benefit more than the consumers.

Question

Quizplus · Accepted Answer

Average-cost pricing allows the natural monopoly to cover its costs, leading to an efficiency gain compared to an unregulated monopoly, which would produce less and charge higher prices.

Which of the Following Will Be True If a Regulator