For a regulated natural monopoly,the marginal cost pricing rule is a rule that sets price ________ marginal cost and achieves an ________ amount of output.
A) equal to; efficient
B) above; inefficient
C) below; efficient
D) equal to; inefficient
E) above; efficient

Question

Quizplus · Accepted Answer

The marginal cost pricing rule sets the price equal to the marginal cost, which ensures that the firm produces the efficient level of output. This is because at the efficient level of output, the marginal cost is equal to the marginal benefit or price, so setting the price equal to marginal cost ensures that the firm is producing where marginal cost equals marginal benefit, and therefore producing the socially optimal level of output.

For a Regulated Natural Monopoly,the Marginal Cost Pricing Rule Is