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Figure: Water Works
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators want to maximize efficiency, the monopolist will be allowed to charge a price of:
A) $5.
B) $6.
C) $13.
D) $21.

Question

Use the following to answer questions:
Figure: Water Works 
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators want to maximize efficiency, the monopolist will be allowed to charge a price of:
A) $5. 
B) $6. 
C) $13. 
D) $21.

Quizplus · Accepted Answer

To maximize efficiency in a natural monopoly, regulators typically set the price equal to the marginal cost. In this scenario, the price of $5 likely represents the marginal cost, which is the efficient price point.

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