Question

g If the government requires a natural monopoly to price at marginal cost, (there are no typo's in this question) Select one: a. producer surplus will increase because quantity supplied is greater. b. monopoly firms will earn zero economic profits because the price of the good equals the cost of producing that good. c. more firms will be able to enter the market. d. monopoly firms will operate at a loss because P

Answer 1

Answer:

monopoly firms will operate at a loss because P =MC.

Explanation:

In the case when the government needed to regulate the natural monopoly to price at the marginal cost so here the firm i.e. monopoly would operate at the loss because the price is equivalent to the marginal cost

i.e.

P = MC

Therefore as per the given situation the option d is correct