Exhibit 26-1

-Refer to Exhibit 26-1.What price is charged if marginal-cost price regulation is imposed on the natural monopoly firm?

Question

Exhibit 26-1
 
-Refer to Exhibit 26-1.What price is charged if marginal-cost price regulation is imposed on the natural monopoly firm?

Quizplus · Accepted Answer

Under marginal-cost pricing regulation, a natural monopoly is required to set its price equal to its marginal cost, which is typically lower than the price it would set to maximize profits. Therefore, the price charged would be P₁, as it represents the marginal cost.

Exhibit 26-1 -Refer to Exhibit 26-1.What Price Is Charged If Marginal-Cost Price