If regulators of the local gas and water utility companies require those firms to price their service at marginal cost
A) there would be a deadweight loss in their markets.
B) the firms might require a tax-financed subsidy to survive.
C) their customers would enjoy no consumer surplus.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

If firms price their services at marginal cost, they may not cover their total costs, including fixed costs, and might require a subsidy to remain financially viable.

If Regulators of the Local Gas and Water Utility Companies