For a natural monopoly,price efficiency means

Question

Quizplus · Accepted Answer

In a natural monopoly, where there is only one firm that can efficiently produce the entire output of the market, setting the price equal to marginal cost results in the most efficient outcome for both the firm and consumers. This is because setting the price above marginal cost would result in the firm earning economic profits, which is not efficient from a societal standpoint, while setting the price below average total cost would result in the firm incurring losses and possibly exiting the market, which is also not efficient. Thus, price efficiency in a natural monopoly means setting the price equal to marginal cost.

For a Natural Monopoly,price Efficiency Means