For a natural monopoly in which economies of scale are taking place at all output levels, which of the following is true? A It would need a subsidy, if regulated to follow marginal cost pricing. B It should be taxed, if regulated to follow average cost pricing It would maximize total revenue rather than profits. It would produce the allocatively efficient output level, to maximize profit. D B) Its marginal cost exceeds its average total cost at all output levels.
For a natural monopoly in which economies of scale are taking place at all output levels, which of the following is true? A It would need a subsidy, if regulated to follow marginal cost pricing. B It should be taxed, if regulated to follow average cost pricing It would maximize total revenue rather than profits. It would produce the allocatively efficient output level, to maximize profit. D B) Its marginal cost exceeds its average total cost at all output levels.
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 5DRQ
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Transcribed Image Text:For a natural monopoly in which economies of scale are taking place at all output levels, which of the following is true?
A It would need a subsidy, if regulated to follow marginal cost pricing.
B It should be taxed, if regulated to follow average cost pricing
It would maximize total revenue rather than profits.
It would produce the allocatively efficient output level, to maximize profit.
D
B) Its marginal cost exceeds its average total cost at all output levels.
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