Charge a price higher than under perfect competition

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Reference no: EM13995818

If the government imposed a direct price regulation that did not allow a natural monopoly with constant marginal cost to charge a price higher than under perfect competition:

the regulation would fail to eliminate all of the monopolist's market power.

the regulation could cause the firm to shut down production.

the regulation would cause the quantity produced and traded in the market to be larger.

the regulation results in higher consumer surplus, lower producer surplus, and higher total surplus.

Reference no: EM13995818

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