If the regulator had a natural monopoly set its price equal to its marginal cost, that would ensure
A) an economic profit for the firm.
B) zero economic profit for the firm.
C) an economic loss for the firm.
D) an accounting loss for the firms.

Question

Quizplus · Accepted Answer

Setting the price equal to marginal cost in a natural monopoly typically results in an economic loss because the average total cost is higher than the marginal cost due to economies of scale.

If the Regulator Had a Natural Monopoly Set Its Price