Exhibit 15-4
-If regulators allow the natural monopolist in Exhibit 15-4 to earn only a normal profit, it will result in an increase in consumer surplus compared to the profit maximizing result.

Question

Exhibit 15-4 
-If regulators allow the natural monopolist in Exhibit 15-4 to earn only a normal profit, it will result in an increase in consumer surplus compared to the profit maximizing result.

Quizplus · Accepted Answer

If the natural monopolist is only allowed to earn a normal profit, they will have to decrease their prices, resulting in an increase in consumer surplus. This is because the price will be closer to the marginal cost, which is lower than the profit-maximizing price.

Exhibit 15-4 -If Regulators Allow the Natural Monopolist in Exhibit 15-4 to Exhibit