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Refer to Exhibit 26- 1. If average-cost pricing is imposed on the natural monopoly firm, what price is charged? a. P1 b. P2 c. P3 d. any of the three prices
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Refer to Exhibit 26- 1. If average-cost pricing is imposed on the natural monopoly firm, what price is charged?

a. P1
b. P2
c. P3
d. any of the three prices

User Durumdara
by
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1 Answer

4 votes

Answer: b. P2

Step-by-step explanation:

Average Cost Pricing regulations being imposed on natural monopolies means that the regulators want them to charge customers a price that is close to or is the same as the Average cost it costs to produce goods and services.

The price that the Monopoly will charge is therefore the intersection between the Average Total Cost Curve and the Demand curve.

From the graph that price is P2 so that is the price that will be charged.

Refer to Exhibit 26- 1. If average-cost pricing is imposed on the natural monopoly-example-1
User Eacousineau
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