In average cost pricing, the natural monopoly would have to set price equal to

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In average cost pricing, the natural monopoly sets the price equal to the average total cost (ATC) of production. This is because if the monopoly charges a price equal to its marginal cost, it will not be able to cover its fixed costs and will suffer losses in the long run. If it charges a price above the ATC, it will earn supernormal profits. However, if it charges a price below the ATC, it will not be able to cover its total costs and will suffer losses. Therefore, setting the price equal to the ATC allows the natural monopoly to earn a normal rate of return on its investment, while also preventing inefficiencies and promoting economic efficiency.

In Average Cost Pricing, the Natural Monopoly Would Have to Set