Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would
A) cause the monopolist to operate at a loss.
B) result in a less than optimal total surplus.
C) maximize producer surplus.
D) result in higher profits for the monopoly.

Question

Quizplus · Accepted Answer

Setting the price equal to marginal cost in a natural monopoly, where average costs are declining, would mean the price is below average cost, causing the monopolist to operate at a loss.

Since Natural Monopolies Have a Declining Average Cost Curve,regulating Natural