Question

The given terms refer to different approaches to regulating natural monopolies. Place each with its corresponding description.A firm is allowed to price its product so that it earns a normal return on capital invested.Firms are directed to charge the price associated with the extra cost of making each unit. This pricing rule often leads to firms earning a negative profit.Firms charge a price that allows them to earn only a normal economic profit.This places maximum limits on the price firms can charge for a good or service.

Answer 1

Answer: Please refer to Explanation

Explanation:

Sometimes Monopolies need to be regulated to ensure the protection of consumers from unfair pricing business strategies.

The below are some of the ways the Government does so.

A firm is allowed to price its product so that it earns a normal return on capital invested. RATE of RETURN REGULATION.

Firms are directed to charge the price associated with the extra cost of making each unit. This pricing rule often leads to firms earning a negative profit. MARGINAL COST PRICING RULE.

Firms charge a price that allows them to earn only a normal economic profit. AVERAGE COST PRICING RULE.

This places maximum limits on the price firms can charge for a good or service. PRICE CAPS.