Figure 15-16

Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit-maximizing owners.If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged?

Question

Figure 15-16
  
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit-maximizing owners.If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged?

Quizplus · Accepted Answer

The economically efficient output level is where the price equals marginal cost. In this scenario, Q₄ is the output level where this condition is met, and P₆ is the corresponding price.

Figure 15-16 Figure 15-16 Shows the Market Demand and Cost Curves Facing