Consider a natural monopoly with large fixed costs and a constant marginal cost of production, such as supplying water to household. Which condition can be used to regulate such a natural monopoly to ensure that the firm continues to operate while maximizing consumer surplus? Question 23Answer a. Demand = Average Cost b. Demand = Marginal Cost c. Marginal Cost = Marginal Revenue d. Price = Marginal Cost e. Price = Marginal Revenue
Consider a natural monopoly with large fixed costs and a constant marginal cost of production, such as supplying water to household. Which condition can be used to regulate such a natural monopoly to ensure that the firm continues to operate while maximizing consumer surplus? Question 23Answer a. Demand = Average Cost b. Demand = Marginal Cost c. Marginal Cost = Marginal Revenue d. Price = Marginal Cost e. Price = Marginal Revenue
Chapter23: Profit Maximization
Section: Chapter Questions
Problem 13E
Related questions
Question
Consider a natural monopoly with large fixed costs and a constant marginal cost of production, such as supplying water to household. Which condition can be used to regulate such a natural monopoly to ensure that the firm continues to operate while maximizing consumer surplus ?
Question 23Answer
a.
Demand = Average Cost
b.
Demand = Marginal Cost
c.
Marginal Cost = Marginal Revenue
d.
Price = Marginal Cost
e.
Price = Marginal Revenue
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