Average-cost pricing for a natural monopoly will:
A)result in the socially efficient level of output.
B)result in a less than socially efficient level of output.
C)result in a greater than socially efficient level of output.
D)result in the firm suffering economic losses.
E)result in the firm earning economic profit.

Question

Quizplus · Accepted Answer

Average-cost pricing for a natural monopoly results in a less than socially efficient level of output because it sets the price equal to average cost, which is higher than marginal cost, leading to underproduction compared to the socially optimal level where price equals marginal cost.

Average-Cost Pricing for a Natural Monopoly Will