Exhibit 26-5

-Refer to Exhibit 26-5.If the natural monopoly firm is regulated to charging a price per unit that achieves resource-allocative efficiency,then it will produce __________ quantity of output and charge a price of __________ per unit.

Question

Exhibit 26-5
 
-Refer to Exhibit 26-5.If the natural monopoly firm is regulated to charging a price per unit that achieves resource-allocative efficiency,then it will produce __________ quantity of output and charge a price of __________ per unit.

Quizplus · Accepted Answer

Resource-allocative efficiency occurs where price equals marginal cost. In a natural monopoly, this is typically at a higher quantity and lower price than unregulated monopoly pricing, which corresponds to Q3 and P1.

Exhibit 26-5 -Refer to Exhibit 26-5.If the Natural Monopoly Firm Is Regulated