Using the figure in the Mini-Case, Natural Gas Regulation, show how much consumer surplus increases if regulators

Using the figure in the Mini-Case, €œNatural Gas Regulation,€ show how much consumer surplus increases if regulators require the producer to change from average cost pricing to marginal cost pricing. Explain why, despite this difference in consumer surplus, regulators generally prefer average cost pricing to marginal cost pricing.

Mini case figure

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Demand DWL = $1.26 billion AC 7.88 MC 5.78 MR 12.1 23 24.2 p, $ per thousand cubic feet of natural gas