In theory,placing a price control on a natural monopoly should:
A) have the same outcome as public ownership.
B) create negative economic profits for the company.
C) reduce deadweight loss to zero.
D) be easy for government to figure out because of easily accessible information.

Question

Quizplus · Accepted Answer

Placing a price control on a natural monopoly may not necessarily create negative economic profits for the company, nor reduce deadweight loss to zero. However, if public ownership were to occur, the government would have complete control over pricing and production, which is similar to placing a price control. Therefore, in theory, placing a price control on a natural monopoly should have the same outcome as public ownership.

In Theory,placing a Price Control on a Natural Monopoly Should