Average cost pricing

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title: "Average cost pricing" type: doc version: 1 created: 2026-02-28 author: "Wikipedia contributors" status: active scope: public tags: ["monopoly-(economics)"] description: "Method for regulating monopolies" topic_path: "economics" source: "https://en.wikipedia.org/wiki/Average_cost_pricing" license: "CC BY-SA 4.0" wikipedia_page_id: 0 wikipedia_revision_id: 0

::summary Method for regulating monopolies ::

Average cost pricing is one of the ways the government regulates a monopoly market. Monopolists tend to produce less than the optimal quantity pushing the prices up. The government may use average cost pricing as a tool to regulate prices monopolists may charge. Average cost pricing forces monopolists to reduce price to where the firm's average total cost (ATC) intersects the market demand curve.

The effect on the market would be:

• Increase production and decrease price.
• Increase social welfare (efficient resource allocation).
• Generate a normal profit for monopolist (Price = ATC) *

References

References

1. [http://ideas.repec.org/a/aea/aecrev/v73y1983i2p189-93.html RePEc] "Marginal vs. Average Cost Pricing in the Presence of a Public Monopoly", ''American Economic Review'' v.73:189-93 (1983).

::callout[type=info title="Wikipedia Source"] This article was imported from Wikipedia and is available under the Creative Commons Attribution-ShareAlike 4.0 License. Content has been adapted to SurfDoc format. Original contributors can be found on the article history page. ::