How the policy affects the utility''s profits and costs

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Question: Public utilities such as electricity are referred to as natural monopolies and are often subject to regulation by a state authority (the "public Regulatory Commission").

[A] Describe why a public utility such as electricity is referred to as a "natural monopoly."
[B] Describe how and why an average cost pricing policy is applied to public utility.
[C] Explain how the policy affects the utility's profits and costs.
[D] Explain the effects of the policy on the efficiency of the utility.

Reference no: EM1375741

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