Exhibit 15.3

-Refer to Exhibit 15.3,which shows the cost and revenue curves for a natural monopolist.The welfare loss that occurs if the monopoly is unregulated is shown by the area _____

Question

Exhibit 15.3
 
-Refer to Exhibit 15.3,which shows the cost and revenue curves for a natural monopolist.The welfare loss that occurs if the monopoly is unregulated is shown by the area _____

Quizplus · Accepted Answer

The welfare loss in a natural monopoly situation occurs in the area where the monopolist's profit-maximizing output and price result in a deadweight loss, which is the area between the demand curve and the marginal cost curve from the monopolist's output level to the socially optimal output level. This area is represented by bcfd, where the demand curve (representing the price consumers are willing to pay) is above the marginal cost curve (representing the cost of producing additional units), indicating that additional welfare could be achieved if more units were produced and consumed.

Exhibit 15.3 -Refer to Exhibit 15.3,which Shows the Cost and Revenue Curves