The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1

In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-Which of the following factors will help determine how the costs of social regulation are split between consumers and producers?

Question

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
  In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-Which of the following factors will help determine how the costs of social regulation are split between consumers and producers?

Quizplus · Accepted Answer

The price elasticities of demand and supply will determine how much of the cost the consumers and producers will bear. If the demand is inelastic, then the consumers will have to bear the majority of the cost of social regulation. If supply is inelastic, then producers will bear the majority of the cost. If both demand and supply are elastic, then the cost will be shared equally between consumers and producers.

The Figure Below Shows Revenue and Cost Curves of a Natural