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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.

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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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.
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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