A regulatory method that stipulates that the firm charge a price that equals average total cost is called
A)average total cost pricing.
B)marginal cost pricing.
C)incentive regulation.
D)marginal-revenue-equals-marginal-cost pricing.
E)average variable cost pricing.

Question

Quizplus · Accepted Answer

The regulatory method described in the question is known as average total cost pricing, where the firm sets the price equal to its average total cost in order to break even. This approach is often used in industries where it is difficult to determine the optimal price, such as public utilities with natural monopolies.

A Regulatory Method That Stipulates That the Firm Charge a Price