Setting Price Equal to Marginal Cost in a Natural Monopoly

question 244

True/False

Setting price equal to marginal cost in a natural monopoly will lead to long-term economic profits.

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Definitions:

Target Costing

A pricing strategy in which a product's selling price is determined by market conditions, and the production cost is managed to ensure profitability.

Desired Return

the minimum profit or return a company or investor aims to achieve from an investment or venture.

Investment

The allocation of resources, such as capital or time, with the expectation of generating an income or profit.

Absorption Costing

An accounting method that includes all manufacturing costs, both direct and indirect, in the cost of a product.