00:02
We have demand and marginal revenue, average total cost and marginal cost for electric utility.
00:11
And first, we want to know if the natural monopoly, the electric company is not regulated, what price will it charge? well, we know, we'll show that in graph a.
00:25
We know that if a monopolist is not regulated, then the price that they charge.
00:32
Is determined by producing the output where marginal revenue is equal to marginal cost of 30 cents, but the price that we charge from the demand curve for the 5 ,000 kilowatt hours would be 80 cents an hour.
00:52
And this is inefficient.
00:54
We have dead weight loss because our price is bigger than our marginal cost.
01:00
And the amount of the dead weight loss would be the triangle here that's bordered by the difference in price between the efficient price at 30 cents and the monopoly price at 80 cents.
01:14
And then the other factor that contributes to dead weight loss is the fact that not enough is produced.
01:21
If we produce where price is equal to marginal cost, we produce 10 ,000 kilowatt hours and charged 30 cents.
01:30
So that means that the triangle outlined in blue would be our dead weight loss...