At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost,the firm
A) makes zero economic profit.
B) makes an economic profit.
C) incurs an economic loss.
D) makes a normal-economic profit.
E) makes either zero economic profit or an economic profit, depending on whether the firm's average total cost equals or is less than its marginal cost.

Question

Quizplus · Accepted Answer

When regulators require a natural monopoly to set a price equal to marginal cost, the firm often incurs an economic loss because its average total cost is typically higher than the marginal cost at the output level, leading to losses since the price doesn't cover the average total costs.

At a Level of Output When Regulators Require a Natural