-If the natural monopoly shown in the figure above is unregulated, then the deadweight loss will be
A) $0.
B) $2 million.
C) $4 million.
D) $8 million.

Question

-If the natural monopoly shown in the figure above is unregulated, then the deadweight loss will be
A) $0. 
B) $2 million. 
C) $4 million. 
D) $8 million.

Quizplus · Accepted Answer

In an unregulated natural monopoly, the firm maximizes profit where marginal cost equals marginal revenue, leading to a price higher than the socially optimal price. This results in a deadweight loss, which is the loss of economic efficiency when the equilibrium outcome is not achieved. The deadweight loss in this scenario is $4 million.

-If the Natural Monopoly Shown in the Figure Above Is