If a city owns and operates the local electricity utility where price equals marginal cost,one can infer that
A) some fraction of the tax revenue raised by the city will pay for the losses of the electricity utility.
B) service will,necessarily,be poor.
C) the utility will generate "profit" for the city.
D) service will,necessarily,be good.
E) electricity prices will rise more quickly when compared to private ownership.

Question

Quizplus · Accepted Answer

When price equals marginal cost, the utility may not cover its total costs, leading to potential losses that the city might need to subsidize with tax revenue.

If a City Owns and Operates the Local Electricity Utility