) If it is allowed to earn only a normal profit, the regulated natural monopolyin Exhibit 156 will set price equal to

Question

)  If it is allowed to earn only a normal profit, the regulated natural monopolyin Exhibit 15­6 will set price equal to

Quizplus · Accepted Answer

In a regulated natural monopoly, the goal is to set a price that allows the firm to earn a normal profit but also ensures that consumers are not exploited. The point where marginal cost intersects with the demand curve (MC=Qd) is the socially optimal price, as it allows the firm to earn a normal profit while also achieving allocative efficiency. In this case, point C on the graph represents the socially optimal price. Therefore, the natural monopoly would set the price equal to C.

) If It Is Allowed to Earn Only a Normal