Natural monopoly pricing is to average total cost as allocative efficiency is to what?

Natural monopoly pricing focuses on setting prices at or near the average total cost to ensure that the company can cover its expenses while providing services to consumers. This is important because a natural monopoly, like a utility company, often has high fixed costs and can provide services more efficiently than multiple companies could. Allocative efficiency, on the other hand, occurs when the price of a good or service reflects the marginal cost of producing it, meaning that resources are distributed in a way that maximizes overall satisfaction. For example, if a water company charges exactly what it costs to supply an additional gallon of water, it achieves allocative efficiency. Therefore, just as natural monopoly pricing aligns with average total cost, allocative efficiency aligns with marginal cost.