If regulators were to force a natural monopoly to set the price of its product equal to its marginal cost of production (in order to encourage economically efficient use of the product), the natural monopoly will

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If a natural monopoly is forced to set the price of its product equal to the marginal cost of production, it will likely earn an economic loss. This is because the marginal cost of production for a natural monopoly is typically lower than the average cost of production, so setting the price equal to the marginal cost would not cover all of the fixed costs associated with running the business. As a result, the natural monopoly would not be able to cover all of its costs and would earn a loss.

If Regulators Were to Force a Natural Monopoly to Set