The conventional way to regulate a natural monopolist is to force it to charge a price equal to marginal cost.

Question

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The conventional way to regulate a natural monopolist is to force it to charge a price equal to average total cost, not marginal cost. This is because in a natural monopoly, the firm’s cost of production is lower than any potential competitor due to economies of scale. Therefore, setting price equal to marginal cost would result in the firm operating at a loss, which is not sustainable in the long run. Setting price equal to average total cost allows the firm to earn a normal profit while still providing goods or services at a reasonable cost to consumers.

The Conventional Way to Regulate a Natural Monopolist Is to Force