Compared to the profit-maximizing equilibrium of a natural monopoly, a price cap regulation ________ the firm's price and ________ the firm's output.
A) raises; decreases
B) lowers; increases
C) raises; increases
D) lowers; decreases

Question

Quizplus · Accepted Answer

A price cap regulation typically lowers the firm's price and increases the firm's output by setting a maximum price that the monopoly can charge, encouraging more production and consumption.

Compared to the Profit-Maximizing Equilibrium of a Natural Monopoly, a Price