Question

One of the criticisms of average cost regulated pricing of a natural monopoly is that the firm Group of answer choices has no incentive to hold costs down. must bear losses continually. will retain positive economic profits. produces more output than is resource-allocative efficient.

Answer 1

The correct answer is a. has no incentive to hold costs down.

Step-by-step explanation:

Given that in the natural monopoly there is no competition for the characteristic that we have as a company to offer our products at a lower price and with highly competitive quality, then the direct question of pricing will not have really in-depth studies that take into account the competitors' behavior in order to establish direct incentives. Its fixing method is basic and strictly depends on internal issues such as the expected profitability margin, supply, demand and production process.