Use the figure below to answer the following questions.

Figure 13.3.4
-Consider the natural monopoly depicted in Figure 13.3.4. Total surplus is at a maximum when quantity is
A)Q₁ and price is P₁.
B)Q₁ and price is P₃.
C)Q₂ and price is P₂.
D)Q₃ and price is P₀.
E)Q₄ and price is 0.

Question

Use the figure below to answer the following questions.
  
Figure 13.3.4
-Consider the natural monopoly depicted in Figure 13.3.4. Total surplus is at a maximum when quantity is
A)Q₁ and price is P₁. 
B)Q₁ and price is P₃. 
C)Q₂ and price is P₂. 
D)Q₃ and price is P₀. 
E)Q₄ and price is 0.

Quizplus · Accepted Answer

Total surplus is maximized when the quantity produced is at the point where the demand curve intersects the marginal cost curve, which is typically at Q₃ and price P₀ in a natural monopoly scenario. This is because it reflects the efficient allocation of resources where marginal cost equals marginal benefit.

Use the Figure Below to Answer the Following Questions