A monopolist has less to gain from cost-saving measures in the production process when
A) the monopoly is unregulated.
B) regulators use average cost pricing to set the monopolist's price.
C) the demand for the product of the monopolist is inelastic.
D) changes in the regulated price occur only after considerable delay.

Question

Quizplus · Accepted Answer

When regulators use average cost pricing, the monopolist's price is set based on costs, so cost-saving measures do not increase profits as prices are adjusted to reflect lower costs.

A Monopolist Has Less to Gain from Cost-Saving Measures in the Production