CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

If the government regulates a natural monopoly through a policy of average-cost pricing, we would expect that, compared to an unregulated natural monopoly, ______
A. prices would be lower and output would be lower.
B. prices would be higher and output would be lower.
C. prices would be lower and output would be higher.
Explanation: Governments regulate natural monopolies in order to reduce prices and increase output. Average-cost pricing, however, always provides the firm with no incentives to control costs, so average costs increase.

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