The use of a two-part price in a regulated natural monopoly
A) maximizes the deadweight loss.
B) allows the firm to maximize profits.
C) may make it possible for the firm to obey a marginal cost pricing rule and not go out of business.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

A two-part pricing strategy can allow a regulated natural monopoly to cover its fixed costs through a fixed fee while setting the usage price equal to marginal cost, thus adhering to marginal cost pricing without incurring losses.

The Use of a Two-Part Price in a Regulated Natural