A serious problem with average total cost pricing is that
A)the deadweight loss to society is greater than with unregulated monopoly pricing.
B)the firm has no incentive to earn a profit.
C)the deadweight loss to society is the same as with unregulated monopoly pricing.
D)inefficiencies in the firm will not be tolerated.
E)the firm has no incentive to reduce costs.

Question

Quizplus · Accepted Answer

Average total cost pricing can lead to a situation where a firm has no incentive to reduce costs because it can recover its costs through pricing, potentially leading to inefficiencies.

A Serious Problem with Average Total Cost Pricing Is That