Final answer:
A regulator may increase social welfare by replacing a monopoly with a competitive industry in the case of a monopolist producing a public good.
Step-by-step explanation:
In the case of a monopolist producing a public good, a regulator may increase social welfare by replacing the monopoly with a competitive industry. This is because monopolies have the ability to set higher prices and restrict output, which can harm consumers. By introducing competition, the regulator can promote lower prices, increased quantity, and more efficiency in the market.
For example, the regulator can set prices equal to the monopolist's marginal cost, which would result in a higher quantity and lower price for consumers compared to the monopoly choice. This is similar to what would occur in a perfectly competitive market.
However, it's important to note that whether a regulator will always increase social welfare depends on various factors and specific market conditions. The decision to replace a monopoly with a competitive industry should be evaluated on a case-by-case basis.