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Figure: Water Works
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators require the water works to charge the price that eliminates deadweight loss, the water works will serve _____ customers.
A) 200
B) 300
C) 375
D) 400

Question

Use the following to answer questions:
Figure: Water Works 
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators require the water works to charge the price that eliminates deadweight loss, the water works will serve _____ customers.
A) 200 
B) 300 
C) 375 
D) 400

Quizplus · Accepted Answer

To eliminate deadweight loss, the price should be set where the demand curve intersects the marginal cost curve. This typically results in the highest quantity served, which in this case is 400 customers.

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