The __________ means that the government can regulate a natural monopoly to minimize deadweight loss without forcing the private firm out of the market.
A) marginal cost pricing rule
B) average cost pricing rule
C) total cost pricing rule
D) fixed cost pricing rule
E) variable cost pricing rule

Question

Quizplus · Accepted Answer

The average cost pricing rule allows the government to regulate a natural monopoly by setting the price equal to the average total cost of production, minimizing deadweight loss while still allowing the private firm to remain in the market. This approach ensures that the firm can cover its costs and earn a reasonable profit while preventing it from charging excessively high prices and causing social welfare losses. The other pricing rules listed do not provide a suitable solution for regulating a natural monopoly.

The __________ Means That the Government Can Regulate a Natural