A problem that arises when regulating a natural monopoly by setting a price ceiling at marginal cos is regulators may better know the firms marginal cost than the firm itself all of these answers are correct the firm will reduce output below the efficient amount, resulting in shortages O the firm's AC may exceed the MC and cause the firm to exit the market

A problem that arises when regulating a natural monopoly by setting a price ceiling at marginal cos is regulators may better know the firms marginal cost than the firm itself all of these answers are correct the firm will reduce output below the efficient amount, resulting in shortages O the firm's AC may exceed the MC and cause the firm to exit the market

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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