Suppose that a regulatory agency has imposed marginal cost pricing on a natural monopolist. We expect that

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Marginal cost pricing for a natural monopolist often results in prices that are lower than the average total cost, leading to economic losses for the firm. Natural monopolies typically have high fixed costs and decreasing average costs, so setting prices equal to marginal costs doesn't cover the total costs when average costs are above marginal costs.

Suppose That a Regulatory Agency Has Imposed Marginal Cost Pricing