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Marginal Cost Pricing:
This is a pricing scheme in which the price received by a firm is set equal to the marginal cost of production. This is the efficient outcome achieved by competitive markets. The bad thing about marginal-cost pricing for public utilities is that normal profit is not guaranteed. The good thing about marginal-cost pricing is that marginal cost is equal to price, and the public utility is operating according to the price equals marginal cost (P = MC) rule of efficiency.
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