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Question
Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to
A) losses, which would drive the monopolist out of business in the long run.
B) profits, which would encourage new producers to enter the industry in the long run.
C) profits, but new firms cannot enter the industry in the long run due to high barriers to entry.
D) losses, which would encourage the monopolist to lower costs in the long run.
Answer
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