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Question
It is unrealistic to regulate a natural monopoly at marginal cost pricing because
a. the government is not allowed to regulate markets.
b. marginal cost pricing ends up having the natural monopoly firm earn zero economic profits.
c. with this type of regulation, the firm will want to shut down, and that outcome is not desirable for society.
d. regulating a market causes more deadweight loss.
e. firms do not need to follow regulations from the government.
Answer
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Related questions
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a. A surplus will continue to exist and will grow larger over time.
b. A surplus will continue to exist and will grow smaller over time.
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Q:
Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
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