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    One simple regulatory method of assuring that revenues cover total costs is Average Cost Pricing. If the firm is allowed to charge Average Total Cost for each unit sold, Total Revenue must be equal to Total Cost.

    While this method accomplishes the goal of generating sufficient revenue, average cost pricing is higher than marginal cost pricing. As shown to the right, price per unit can be much higher and total output is considerably less, so any hope of allocative efficiency is lost with this approach.

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