A natural monopoly regulated with an average cost pricing rule is _______.
A) efficient and incurs an economic loss
B) inefficient and makes zero economic profit
C) efficient and makes zero economic profit
D) inefficient and makes an economic profit

Question

Quizplus · Accepted Answer

A natural monopoly regulated with an average cost pricing rule is inefficient because it does not achieve allocative efficiency but makes zero economic profit since prices are set equal to average costs.

A Natural Monopoly Regulated with an Average Cost Pricing Rule