NARRBEGIN: Exhibit 15-3
Exhibit 15-6

-If it is allowed to earn only a normal profit, the regulated natural monopoly in Exhibit 15-6 will set price equal to

Question

NARRBEGIN: Exhibit 15-3
Exhibit 15-6
 
-If it is allowed to earn only a normal profit, the regulated natural monopoly in Exhibit 15-6 will set price equal to

Quizplus · Accepted Answer

In a regulated natural monopoly, the regulated price will typically be set at the point where the average total cost (ATC) curve intersects with the demand curve, which is point C in this exhibit. At this point, the firm will only earn a normal profit, which is consistent with regulatory objectives of promoting efficiency and protecting consumers from excessive pricing. Therefore, the best choice in this scenario is C.

NARRBEGIN: Exhibit 15-3 Exhibit 15-6