Before government regulation, the electric company produces at point m, where quantity is Q_m and price P_m is well above the firm’s marginal cost curve. If the government sets a price cap at the level equal to the firm’s marginal cost, the firm will produce at the perfectly competitive price (P_c) and quantity (Q_c). Consumer surplus under the regulation will expand from triangle A to the triangle A + B + C. However, since P_c falls below the firm’s average total cost curve, the firm will be operating with negative profit, and the price cap is not a sustainable regulation.