The profit-maximizing natural monopoly will

Question

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A natural monopoly maximizes profit by producing the quantity of output where marginal revenue (MR) equals marginal cost (MC), and then charges the highest price per unit that the market will bear for that quantity. This strategy maximizes the difference between total revenue and total costs. Setting price equal to marginal cost (A) is not typically characteristic of a profit-maximizing monopoly, as it would not allow the firm to cover its average costs. The statement about production costs being necessarily higher if unregulated (D) is not inherently true, as regulation can take various forms and does not always lead to lower production costs.

The Profit-Maximizing Natural Monopoly Will