Consider a Natural Monopoly That Has Declining LRAC Over the Entire

Multiple Choice

Consider a natural monopoly that has declining LRAC over the entire range of the market demand curve.If it is regulated and required to charge a price that is equal to MC,the resulting level of output is

A) allocatively efficient,and profit is earned.
B) allocatively efficient,but the firm must be paid a subsidy or it will eventually go out of business.
C) less than the allocatively efficient level,and profit is zero.
D) less than the allocatively efficient level,but losses occur.
E) greater than the allocatively efficient level,but losses occur.