One way the government could regulate a natural monopoly at the marginal cost level would be to
A) allow the natural monopoly to produce at the profit-maximizing point.
B) tax the monopoly.
C) place a tariff on the monopoly.
D) give the monopoly a patent.
E) subsidize the monopoly.

Question

Quizplus · Accepted Answer

Subsidizing the monopoly allows it to operate at the marginal cost level, which is typically lower than its average cost. This approach helps in covering the difference between the high fixed costs and the prices needed to attract consumers, making services or goods more affordable without sacrificing the company's financial viability.

One Way the Government Could Regulate a Natural Monopoly at the Marginal