The Figure Above Shows a Natural Monopoly Regulated Using a Marginal

question 7

Multiple Choice

The figure above shows a natural monopoly regulated using a marginal cost pricing rule.
-In the figure above,an

• A) efficient output results, but the firm incurs a loss per household which must be subsidized in some way.
• B) inefficient output results, though the firm covers its costs.
• C) efficient output results, though marginal costs exceed average total costs.
• D) inefficient output results because the firm cannot cover its costs.
• E) efficient output results because consumer surplus is maximized.

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