Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8.13.Suppose the government regulates this industry in order to remove the inefficiency implied by the behaviour of the profit-maximising owners.If regulators require that the firm produce the economically efficient output level,what is this level and what price will be charged?

Question

Figure 8.13  Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8.13.Suppose the government regulates this industry in order to remove the inefficiency implied by the behaviour of the profit-maximising owners.If regulators require that the firm produce the economically efficient output level,what is this level and what price will be charged?

Quizplus · Accepted Answer

The economically efficient output level is Q4, where marginal cost equals marginal benefit. The price charged will be P4, which is the price that consumers are willing to pay for this output level.

Figure 813 Figure 8