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Author Question: What are a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages ... (Read 54 times)

olgavictoria

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on: Jun 29, 2018
What are a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?
 
  What will be an ideal response?

Question 2

Your textbook discusses dry counties in the U.S. What is a dry county?
 
  A) A county where rainfall is below the national average
  B) A county that experiences no rainfall
  C) A county in which it is illegal to produce, purchase and sell alcohol
  D) A county in which only dry gin is consumed


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l.stuut

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Natural monopolies can be regulated using a marginal cost pricing rule, so that the firm must set its price equal to its marginal cost, or by using an average cost pricing rule, so that the firm must set its price equal to its average total cost. The advantage of the marginal cost pricing rule is that the resulting output is efficient; the disadvantage is that the firm suffers an economic loss. The advantage of the average cost pricing rule is the firm earns zero economic profit; the disadvantage is that it produces an inefficient quantity of output.

Answer to Question 2

C


olgavictoria

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Reply 2 on: Jun 29, 2018
YES! Correct, THANKS for helping me on my review

amandalm

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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