A regulator sets the price in a natural monopoly equal to the monopolist's marginal coast, the rate is identical to marginal cost (P = MC), as in figure three.14. The aggressive fee and amount are laptop and quality control. The monopoly price and quantity are located where marginal revenue equals marginal cost (MR = MC): PM and QM.
The fee of manufacturing the ultimate unit is extra than the price, and is consequently making a loss, decreasing profit. in the change case, if it's miles less than the fee, by using producing extra gadgets, profits can be elevated. hence, it is ideal for them to set fee same to marginal fee.
Marginal fee pricing is the practice of setting the fee of a product at or barely above the variable cost to provide a further unit of output. Marginal fee pricing most effective covers the variable charges of manufacturing and does no longer bear in mind constant expenses.
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