Which of the Following Explains Why the Marginal Cost Pricing

question 56

Multiple Choice

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

• A) The ATC curve is downward sloping throughout the relevant range, therefore the MC is lower than the ATC.
• B) The demand curve is downward sloping, therefore price falls as quantity increases.
• C) The MC is constant and equal to price.
• D) Because output is determined by setting MC equal to the price, consumer surplus is maximized.
• E) The firm's MR is always less than its price.

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