Marginal cost regulation of a natural monopoly:
A) generates economic losses for the seller.
B) necessitates a subsidy payment to the firm.
C) imposes a price that is less than average total cost.
D) is characterized by all of the above.

Question

Quizplus · Accepted Answer

Marginal cost regulation typically results in prices below average total cost, leading to economic losses for the firm, which often requires subsidies to sustain operations.

Marginal Cost Regulation of a Natural Monopoly