The ________ cost pricing rule means that the government can regulate a natural monopoly to minimize deadweight loss without forcing the private firm out of the market.
A) marginal
B) average
C) total
D) fixed
E) variable

Question

Quizplus · Accepted Answer

The average cost pricing rule allows a natural monopoly to cover all its costs, including a normal profit, by setting prices equal to average costs. This approach minimizes deadweight loss without pushing the firm out of the market, as it ensures the firm can sustain its operations by covering its total costs.

The ________ Cost Pricing Rule Means That the Government Can