Regulated natural monopoly graph: socially optimal (P = MC) and fair-return (P = ATC) prices

An example figure from the Cost and Revenue Curves generator.

Graph of Price and costs against Quantity with no numbers on the axes: demand D = AR, a dashed MR curve, and MC and ATC curves, ATC still falling where demand crosses MC. Three dots on demand, each with dashed lines to both axes: PM and QM above where MR meets MC; PFR and QFR where demand crosses ATC the second time; and PSO and QSO where demand crosses MC, the lowest price and the largest quantity (M, FR and SO subscripts). — A natural monopoly, whose ATC is still falling where demand meets MC, at the three prices it could charge. Unregulated, it produces QM, where MR = MC, and charges PM. At the fair-return price PFR, where demand meets ATC, it produces QFR and breaks even; at the socially optimal price PSO, where demand meets MC, it produces the most, QSO, at a price below ATC.

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