The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12- 7
-Traditionally,economists have regarded monopoly as an undesirable market structure because

Question

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
  FIGURE 12- 7
-Traditionally,economists have regarded monopoly as an undesirable market structure because

Quizplus · Accepted Answer

The diagram shows that the natural monopoly is producing at a quantity where marginal cost intersects with marginal revenue, which is lower than the point where marginal cost intersects with demand. This means that the monopoly is not producing the socially optimal level of output, leading to allocative inefficiency. Therefore, option D is the best answer. Options A, B, C, and E do not apply to the situation described in the question.

The Diagram Below Shows Cost and Revenue Curves for a Natural