If government regulators guarantee a natural monopolist that it will earn normal profits, then the monopolist will

Question

Quizplus · Accepted Answer

Guaranteeing normal profits to a natural monopolist does not inherently ensure resource-allocative efficiency, nor does it imply that the monopolist will charge a price above average total cost or produce at a point where marginal revenue equals price. These outcomes depend on additional factors such as the regulatory framework, cost structures, and market demand.

If Government Regulators Guarantee a Natural Monopolist That It Will