Regulated natural monopolies can obey a marginal cost pricing rule and still make a normal profit by engaging in

Question

Quizplus · Accepted Answer

Price discrimination and two-part tariff pricing allow for a regulated natural monopoly to make a normal profit while still adhering to a marginal cost pricing rule. Price discrimination involves charging different prices to different customers depending on their willingness to pay, while a two-part tariff pricing involves charging a fixed fee in addition to a per-unit charge. Both of these pricing strategies can result in the natural monopoly making a normal profit despite pricing at marginal cost.

Regulated Natural Monopolies Can Obey a Marginal Cost Pricing Rule