A marginal cost pricing rule for a natural monopoly sets
A) price equal to marginal cost and greater than average total cost.
B) marginal revenue equal to marginal cost.
C) marginal revenue equal to average total cost.
D) price equal to marginal cost.

Question

Quizplus · Accepted Answer

A marginal cost pricing rule for a natural monopoly sets the price equal to the marginal cost to achieve allocative efficiency, even though this may result in a price lower than average total cost, potentially requiring a subsidy.

A Marginal Cost Pricing Rule for a Natural Monopoly Sets