Suppose a government sets theprice for a natural monopoly at the compe

Suppose a government sets theprice for a natural monopoly at the competitive level such that P = MC. To keep the seller from taking a loss under this policy, the government could provide a lump-sum payment to the firm.

How could we determine this payment? A) Multiply the competitive quantity by the competitive marginal cost
B) Multiply the competitive quantity by the regulated price
C) Multiply the competitive quantity by the difference between MC and AC
D) Multiply the difference in the competitive and monopoly quantities by AC

ANSWER

C