A natural monopoly that is regulated to set price equal to marginal cost
A) makes an economic profit.
B) makes zero economic profit.
C) incurs an economic loss.
D) could make an economic loss, an economic profit, or zero economic profit.
E) makes zero normal profit.

Question

Quizplus · Accepted Answer

When a natural monopoly is regulated to set price equal to marginal cost, it typically incurs an economic loss because its average total cost is higher than the marginal cost at the output level where marginal cost equals price, due to the nature of its cost structure.

A Natural Monopoly That Is Regulated to Set Price Equal