Suppose the Local Government Is Considering Using Marginal Cost Pricing

question 111

Multiple Choice

Suppose the local government is considering using marginal cost pricing to set rates for a cable TV company.Which of the following arguments supports marginal cost pricing?

• A)Marginal cost pricing gives the monopoly economic profit and a reason to stay in business.
• B)Marginal cost pricing gives the firm a normal economic profit and a reason to stay in business.
• C)Marginal cost pricing is allocatively efficient.
• D)Average cost pricing requires subsidies, which can be costly.
• E)Average cost pricing forces monopolies to operate at a loss.

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