Setting price equal to marginal cost in a natural monopoly will lead to
A)excess profits for the firm.
B)losses for the firm.
C)zero profits for the firm.
D)One cannot tell without further information.

Question

Quizplus · Accepted Answer

In a natural monopoly, the marginal cost is always below the average cost, which means that setting the price equal to marginal cost will be below the average cost. This will lead to losses for the firm.

Setting Price Equal to Marginal Cost in a Natural Monopoly