Cost of service pricing requires a natural monopolist to: a

Accounting Dec 08, 2020

Cost of service pricing requires a natural monopolist to:

a. set a price equal to average cost

b. set a price that allows a specified return to labor and capital

c. set a price that allows a competitive return on investment

d. set a price equal to marginal cost

e. set a price equal to marginal revenue

Expert Solution

Cost of service pricing requires a natural monopolist to:

a. set a price equal to average cost

The natural monopolist face declining average cost curve with the increase in the quantity of output. Natural monopoly has capture the market that much or regulated by the government that it can able to produce maximum amount of quantity at low cost. So it produce the good where demand is equal to average cost.

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