Which of the following is an example of government regulation of a natural monopoly distorting incentives?
A) A natural monopoly is held to average-cost pricing; therefore, it has extra incentives to hold costs down.
B) A natural monopoly is protected from competitors; therefore, it has excellent customer service.
C) A natural monopoly is protected from competitors; therefore, it doesn't care much about the quality of the product it sells.
D) A natural monopoly is held to average-cost pricing; there it has no fixed costs.
Correct Answer:
Verified
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