Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit-maximizing owners.If regulators require that the firm produces the economically efficient output level,what is this level and what price will be charged?

Question

Quizplus · Accepted Answer

The economically efficient output level is where the price equals marginal cost (P=MC). In the context of the choices given, Q4 units at P6 is likely where this condition is met, assuming P6 is the price where the marginal cost curve intersects the demand curve at Q4.

Figure 15-16 Shows the Market Demand and Cost Curves Facing