When the government regulations force a natural monopoly to produce where price equals average total cost, social welfare is greater than it would be without any such regulations, though it is not maximized.
The purpose that a natural monopoly serves, is to maximize profits, by producing at the quantity where marginal revenue and marginal cost, both are equal. Thereafter, it takes into consideration the demand curve to see and figure out, what should be the final price for that quantity.
The government can use several ways to regulate a natural monopoly like limiting the price rise through price capping or breaking up the monopolies or even regulating the mergers.
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