There is a deadweight loss if a natural monopoly is regulated to use
A) marginal cost pricing and if it is regulated to use average cost pricing.
B) average cost pricing and if it is allowed to be unregulated and maximize its profit.
C) marginal cost pricing and if it is allowed to be unregulated and maximize its profit.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

A natural monopoly incurs a deadweight loss if it is regulated to use average cost pricing or if it is unregulated and maximizes profit, as both scenarios lead to prices above marginal cost, reducing total welfare.

There Is a Deadweight Loss If a Natural Monopoly Is