If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be ________ off than if the firm was unregulated and the firm's owners will be ________ off than if it was unregulated.
A) better; better
B) better; worse
C) worse; better
D) worse; worse

Question

Quizplus · Accepted Answer

Consumers will be better off because they will pay a lower price equal to the marginal cost, which is typically lower than the monopoly price. The firm's owners will be worse off because pricing at marginal cost may not cover the total costs, leading to losses.

If an Industry Is a Natural Monopoly and Regulators Decide