For a natural monopoly firm, the resource-allocative efficient output is 200 units. The highest per-unit price that can be charged for this output is $3. Average total cost at 200 units is $3.50. For the natural monopoly firm that produces and sells 200 units of output,

Question

Quizplus · Accepted Answer

A natural monopoly firm's marginal cost is below its average total cost when it produces at the resource-allocative efficient output level, indicating choice A is correct. Since the firm sells its output at $3 but has an average total cost of $3.50, it incurs a loss of $0.50 per unit, making choice B correct. There's no information to suggest that fixed costs must be zero, so choice C is incorrect. Therefore, choices A and B are correct, making D the right answer.

For a Natural Monopoly Firm, the Resource-Allocative Efficient Output Is