If the regulator wanted to maximize the total surplus in a natural monopoly market, the regulator has the firm set its price equal to its
A) average fixed cost.
B) average total cost.
C) average variable cost.
D) marginal cost.

Question

Quizplus · Accepted Answer

Setting the price equal to marginal cost maximizes total surplus because it leads to an efficient allocation of resources where the price reflects the true cost of producing an additional unit, thus maximizing consumer and producer surplus.

If the Regulator Wanted to Maximize the Total Surplus in a Natural