Suppose the Local Government Is Considering Using Marginal Cost Pricing

Multiple Choice

Suppose the local government is considering using marginal cost pricing to set rates for a cable TV company.Which of the following arguments supports marginal cost pricing?

A) Marginal cost pricing gives the monopoly economic profit and a reason to stay in business.
B) Marginal cost pricing gives the firm a normal economic profit and a reason to stay in business.
C) Marginal cost pricing is allocatively efficient.
D) Average cost pricing requires subsidies, which can be costly.
E) Average cost pricing forces monopolies to operate at a loss.