Under a marginal cost pricing rule,a natural monopoly
A) makes a reasonable profit.
B) makes an economic profit.
C) earns accounting profits, but breaks even in economic terms.
D) incurs an economic loss.
E) makes a normal profit, but it cannot be determined whether or not it makes an accounting profit.

Question

Quizplus · Accepted Answer

Under a marginal cost pricing rule, a natural monopoly would incur an economic loss because it would be required to price its goods or services at the marginal cost, which is typically below the average total cost for a natural monopoly due to high fixed costs and economies of scale. This means the firm would not cover its average total costs, leading to an economic loss.

Under a Marginal Cost Pricing Rule,a Natural Monopoly