To avoid subsidies, the government should cap the price for a natural monopoly at its:
A)marginal cost.
B)average total cost.
C)average variable cost.
D)fixed cost.

Question

Quizplus · Accepted Answer

Capping the price at the average total cost allows the natural monopoly to cover all its costs (both variable and fixed) without making a loss, thus avoiding the need for subsidies.

To Avoid Subsidies, the Government Should Cap the Price for a Natural