In order to reduce the deadweight loss of a natural monopoly, the government can regulate the price such that it is below marginal cost.

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Regulating the price below marginal cost would not be sustainable for the monopoly, as it would not cover the costs of production, leading to losses and potentially causing the firm to exit the market. Instead, to reduce deadweight loss, the government might regulate prices to be equal to marginal cost or set them at a level that allows for some profit but is closer to competitive pricing.

In Order to Reduce the Deadweight Loss of a Natural