2. Suppose that a natural monopolist was required by law to charge average total cost. On a diagram,label the price charged and the deadweight loss to society relative to marginal-cost pricing.
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Explanation:
Consider the example of a natural monopoly.
In the monopoly market, price is charged when the marginal cost curve intersects the marginal revenue curve. The profit is maximum at this level.
In the perfect competitive market, the price level is charged when price level is equal to the marginal cost. There is no deadweight loss in perfect competitive market and the society is at efficient production leve
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