If a Natural Monopoly Has an Average Cost Pricing Rule

question 128

Multiple Choice

If a natural monopoly has an average cost pricing rule imposed, the rule will

• A) maximise total surplus in the regulated industry.
• B) reduce the consumer surplus and generate a deadweight loss when compared to a marginal cost pricing rule.
• C) generate an economic loss for the regulated firm.
• D) set price below marginal cost.

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