Modern economic pursuit of free competition in the market, but with the emergence of socialized mass production, the scale of production development back to grow, monopoly appeared, leading to the market can not be adjusted on their own, that is, market failure.
The marginal cost pricing method is the government will set the price at the level of marginal cost Pc determined by the intersection of the marginal cost curve (MC) and the demand curve (D), at this time, the purpose of price control is to improve efficiency.
When the price is Pc, the firm's economic profit is negative, i.e., the firm's average revenue is less than its average cost; to protect the firm's interests, the government subsidizes the firm's losses.
Extended:
Domestic waste, kitchen waste, bulky waste, municipal sewage treatment plant sludge, green waste, fecal sludge, animal carcasses, medical waste, discarded vehicles, hazardous industrial solid waste, and other hazardous wastes, which are the segmentation of the solid waste treatment The market is characterized by limited waste production, meager industry profits and institutional fragmentation.
Economies of scale in the production of treatment enterprises need to be in a larger range of waste treatment volume and the corresponding larger capital equipment production and operation level can be reflected on the solid waste market segments in a certain region, if the effect of economies of scale, only a few or a large enterprise can deal with the volume of solid waste in a certain segment of the market.
Baidu Encyclopedia - Market Failure