"If a Natural Monopoly Is Regulated Using a Marginal Cost

question 297

Essay

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

---

Definitions:

Mathematical Models

Representations of real-world systems through mathematical concepts and language, used in a wide range of sciences to predict and analyze behaviors.

Controlled Experiments

Experimental setups in which researchers manipulate one variable while holding all other variables constant to study cause and effect relationships.

Inputs And Outputs

Refers to the materials, energy, or information that enters a system (inputs) and the results or products that come out of it (outputs).

Scientific Laws

Statements based on repeated experiments or observations that describe or predict a range of natural phenomena.