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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Why might profit regulation lead to rising costs for the regulated firm?

To determine

Explain the reason why profit regulation leads to increase the cost of the regulated firms.

Explanation

Profit regulation is the government policy to set the market price equal to the average total cost (ATC), where the natural monopoly earns zero economic profit in the long-run. Since the firm is allowed to charge its price at an average total cost, if there is an incr...

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