The Energir company (previously Gaz Mtro) has a monopoly on the natural gas distribution market in Quebec. The distribution of natural gas generates large fixed costs to build and maintain the infrastructure of the distribution network. On the other hand, the marginal cost of delivering one more cubic foot to a customer is very low, if not zero. If the government wishes to regulate the pricing of this monopoly so as to get as close as possible to the effective quantity without forcing Energir to make losses, it will have to impose:

Please choose an answer:

a. A price that includes a tax equal to the marginal social cost.

b. A price that equates marginal revenue with marginal cost.

c. A price equal to the average total cost.

d. A price equal to marginal cost.