A natural monopoly that charges the profit- maximising price will produce _______ amount of output than a _______.

Question

Quizplus · Accepted Answer

A natural monopoly that charges the profit-maximising price will produce a smaller amount of output compared to when it is regulated with a marginal cost pricing rule. This is because marginal cost pricing encourages production up to the point where the price equals the marginal cost, typically resulting in a higher output than when aiming for profit maximisation, which doesn't necessarily align with producing where price equals marginal cost.

A Natural Monopoly That Charges the Profit- Maximising Price Will