Under a marginal cost pricing rule, a regulated natural monopoly
A) makes a positive economic profit and there is a deadweight loss.
B) makes zero economic profit and there is no deadweight loss.
C) incurs an economic loss and there is a deadweight loss.
D) incurs an economic loss and there is no deadweight loss.

Question

Quizplus · Accepted Answer

Under marginal cost pricing, the price is set equal to the marginal cost, which is typically below average total cost for a natural monopoly, leading to economic losses but no deadweight loss as the price reflects the true cost of production.

Under a Marginal Cost Pricing Rule, a Regulated Natural Monopoly