If the government wants to regulate a natural monopoly while ensuring it does not earn profits or require subsidies,it will force the firm to set price equal to

Name: If the government wants to regulate a natural monopoly while ensuring it does not earn profits or require subsidies,it will force the firm to set price equal to
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Question

Quizplus · Accepted Answer

Setting the price equal to average cost allows the firm to cover all its costs, including fixed costs, without making a profit, thus avoiding the need for subsidies.

If the Government Wants to Regulate a Natural Monopoly While