If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to
A)minimum average fixed cost.
B)average total cost.
C)marginal cost.
D)marginal revenue.

Question

Quizplus · Accepted Answer

Setting a price equal to the average total cost allows a natural monopoly to cover all its costs (both fixed and variable) and earn a normal profit, which is considered a fair return. This approach ensures the company can sustain its operations without making excessive profits at the expense of consumers.

If a Regulatory Commission Wants to Provide a Natural Monopoly