Choose the Statement That Best Describes the Dilemma Facing the Regulator

Choose the statement that best describes the dilemma facing the regulator of a natural monopoly.

A) Marginal- cost pricing will result in allocative inefficiency; average- cost pricing leads to profits or losses.
B) Marginal- cost pricing will result in productive and allocative inefficiency; average- cost pricing will not.
C) Marginal- cost pricing leads to profit or losses; average- cost pricing results in allocative inefficiency.
D) Both kinds of regulation have the same implications for allocative efficiency.
E) There is no dilemma.