Exhibit 15-3

-If it is allowed to earn only a normal profit,the regulated natural monopoly in Exhibit 15-3 will set price equal to

Question

Exhibit 15-3
 
-If it is allowed to earn only a normal profit,the regulated natural monopoly in Exhibit 15-3 will set price equal to

Quizplus · Accepted Answer

When regulated to only earn a normal profit, the natural monopoly will set price at the point where marginal cost (MC) intersects with the demand curve (D), known as the "efficient scale" of production. This occurs at price c, where MC = D. At any higher price, the firm would be earning more than a normal profit, and at any lower price, it would be earning less than a normal profit. Therefore, choice C is the correct answer.

Exhibit 15-3 -If It Is Allowed to Earn Only a Normal Profit,the