In the case of an average cost pricing rule for a natural monopoly
A) the monopolist sustains an economic loss.
B) the monopolist makes an economic profit.
C) consumers pay a lower price than under the marginal cost pricing rule.
D) consumers pay a higher price than under the marginal cost pricing rule.

Question

Quizplus · Accepted Answer

Under an average cost pricing rule, the price is set equal to the average cost, which is typically higher than the marginal cost. Therefore, consumers pay a higher price compared to the marginal cost pricing rule.

In the Case of an Average Cost Pricing Rule for a Natural