For a natural monopoly, if price is equal to marginal social cost, then
A) the deadweight loss is as large as possible.
B) the firm makes zero economic profit.
C) there is no deadweight loss.
D) there is no deadweight loss and the firm makes a positive economic profit.

Question

Quizplus · Accepted Answer

When price equals marginal social cost in a natural monopoly, it results in an efficient allocation of resources, eliminating deadweight loss. However, the firm may not cover its average total costs, potentially leading to zero or negative economic profit.

For a Natural Monopoly, If Price Is Equal to Marginal