When compared to the profit maximizing price and quantity supplied, an average-cost pricing policy for a natural monopoly causes the price the monopolist charges to ________ and the quantity it sells to ________.

Question

Quizplus · Accepted Answer

An average-cost pricing policy for a natural monopoly results in a lower price than the profit-maximizing price, because it sets the price equal to average costs rather than marginal costs. This lower price increases the quantity sold, as it makes the product or service more affordable to consumers.

When Compared to the Profit Maximizing Price and Quantity Supplied