Under marginal cost pricing by a natural monopoly,
A) price is less than average cost.
B) there will be a welfare cost.
C) the producer will earn a higher than normal rate of return.
D) there is little or no incentive for the producer to hold down costs.

Question

Quizplus · Accepted Answer

Under marginal cost pricing, the price is set equal to the marginal cost, which is typically below the average cost for a natural monopoly, leading to losses.

Under Marginal Cost Pricing by a Natural Monopoly