Microeconomics 18th Edition by Campbell McConnell, Stanley Brue, Sean Flynn

Exercise 6

In view of the problems involved in regulating natural monopolies, compare socially optimal (marginal-cost) pricing and fair-return pricing by referring again to Figure 10.9. Assuming that a government subsidy might be used to cover any loss resulting from marginal-cost pricing, which pricing policy would you favor Why What problems might such a subsidy entail
Reference Figure 10.9