A regulatory policy under which the government picks the point on the demand curve at which price equals average cost is known as

Question

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With average-cost pricing policy, the government sets the price at the point where it equals the average cost of production. This policy ensures that the producer earns a normal profit, covering both variable and fixed costs, without excessive profits. It is often used as a regulatory tool for natural monopolies, such as water or electricity utilities, where the high fixed costs make it difficult for new entrants to come into the market.

A Regulatory Policy Under Which the Government Picks the Point