Final answer:
Regulators can set prices and quantities produced for an industry to maximize social efficiency by choosing a point along the market demand curve that benefits consumers and the broader social interest. This can be illustrated using a diagram by setting the price equal to the marginal cost at the point where it crosses the demand curve.
Step-by-step explanation:
When regulators set prices and quantities produced for an industry to maximize social efficiency, they choose a point along the market demand curve that benefits consumers and the broader social interest. One possible choice is point C, where the firm produces the quantity of output where marginal cost crosses the demand curve at an output of 8, and charges a price equal to the marginal cost at that point (3.5).
This rule is appealing because it sets the price equal to marginal cost, which would occur in a perfectly competitive market. It allows for a higher quantity and lower price compared to a monopoly choice. Additionally, it leads to an efficient allocation of resources where the value to consumers of the last unit bought and sold is equal to the marginal cost of producing it.