Compared to the profit- maximising equilibrium of a natural monopoly, a price cap regulation _______ Price and _______ output.
A) lowers; decreases
B) raises; decreases
C) raises; increases
D) lowers; increases

Question

Quizplus · Accepted Answer

Price cap regulation typically lowers the price and increases output compared to the profit-maximizing equilibrium of a natural monopoly, as it prevents the monopoly from setting excessively high prices and encourages more production to meet demand.

Compared to the Profit- Maximising Equilibrium of a Natural Monopoly