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Sagot :
The problem with socially optimal pricing regulation in a natural monopoly is the price ceiling which is set based on the marginal cost, incurring a huge dead weight on the economies.
To establish a socially optimal price for a natural monopoly, the government must select the price at which the marginal cost curve intersects the demand curve. But, for a better competition and higher availability of goods, a price ceiling is set based on fair return price, helping the monopoly to make normal profit.
Learn more about Socially optimal pricing here:
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