Price cap regulation involves
A) setting the monopoly's price equal to its average total cost.
B) setting the monopoly's price equal to its profit-maximizing price.
C) setting a maximum price the monopoly may charge.
D) assuming a natural monopoly will not charge a higher than profit-maximizing price.
E) setting the monopoly's price equal to its marginal cost.

Question

Quizplus · Accepted Answer

Price cap regulation involves setting a maximum price that a monopoly may charge. This is done with the aim of preventing the monopoly from charging excessive prices and exploiting its market power. Other options (A, B, D, E) do not accurately describe price cap regulation.

Price Cap Regulation Involves