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, it will result in lower prices for consumers and an increase in consumer surplus. This is because the profit maximizing result with monopoly pricing leads to higher prices and a smaller quantity demanded, resulting in a lower consumer surplus.

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