Which of the following is a possible negative result of a policy of average-cost pricing as a method of regulating a natural monopoly?
A)economic losses will accumulate over time to unsustainable levels
B)taxpayers will have to subsidize the economic losses of the regulated monopoly
C)the regulated monopoly earns unreasonable profits
D)socially desirable capital investment may not occur
E)the induced technological change leads to more industries becoming natural monopolies

Question

Quizplus · Accepted Answer

Average-cost pricing can lead to insufficient profits for the monopoly, which may deter investment in capital improvements or innovation, resulting in a lack of socially desirable capital investment.

Which of the Following Is a Possible Negative Result of a Policy