If a natural monopoly is allowed to set its price above its average total cost, then
A) the company incurs an economic loss.
B) competitors will enter the market.
C) the company makes an economic profit.
D) the company will produce more than the efficient amount of output.

Question

Quizplus · Accepted Answer

When a natural monopoly sets its price above its average total cost, it is able to make an economic profit because its revenues exceed its costs. This situation does not necessarily lead to increased competition or economic loss, nor does it imply that the company will produce more than the efficient amount of output.

If a Natural Monopoly Is Allowed to Set Its Price