In view of the problems involved in regulating natural monopolies, compare socially optimal (marginal-cost) pricing and fair-return
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In view of the problems involved in regulating natural monopolies, compare socially optimal (marginal-cost) pricing and fair-return pricing by referring again to Figure 22.9.
Assuming that a government subsidy might be used to cover any loss resulting from marginal-cost pricing, which pricing policy would you favor? Why? What problems might such a subsidy entail?
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