Under the social interest theory of regulation,the goal of regulating natural monopolies is
A) to provide a larger, though not maximum, profit for the firms.
B) to use average cost pricing.
C) to provide an outcome similar to the competitive outcome.
D) to provide a the maximum profit for the firms.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The social interest theory of regulation aims to provide an outcome similar to the competitive outcome for natural monopolies as they can restrict output and charge higher prices due to their dominant position in the market. This helps to achieve allocative efficiency and promote social welfare by ensuring that resources are allocated efficiently and consumers are charged fair prices. Using average cost pricing may not lead to the same outcome as competitive markets, while providing the maximum profit for the firms may not be in the interest of consumers or society as a whole.

Under the Social Interest Theory of Regulation,the Goal of Regulating