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

Question

Quizplus · Accepted Answer

Under an average cost pricing rule, a regulated natural monopoly sets prices equal to average costs, allowing it to cover its costs and make zero economic profit. However, this pricing does not achieve allocative efficiency, leading to a deadweight loss.

Under an Average Cost Pricing Rule, a Regulated Natural Monopoly