One of the Practical Difficulties in Regulating a Natural Monopoly

Multiple Choice

One of the practical difficulties in regulating a natural monopoly using average-cost pricing is:

A) that the average-cost pricing rule leads to losses which must be subsidized.
B) that the price ceiling from average-cost pricing is likely to result in shortages.
C) that the monopoly has no incentive to minimize costs.
D) it will result in a surplus in the market leading to a drastic fall in the price.