To ensure that the public utility company earns only a normal rate of return on investment, the regulatory,commission,usually,sets P = LAC. This is given by point G, at which P' = LAC = $3 and Q = 6 million units per time period. The best level of output from society’s point of view, however, is 8 million units, given by point H, at which P = LMC = $1. At Q = 8 million, however, the public utility would incur a loss of $1 ( HJ) per unit and $8 million per time period. As a result, the company would not supply the service in the long run without a per-unit subsidy of $1 per unit. In general, regulatory commissions set P = LAC (point G in Figure 12-3) so that the public utility company breaks even in the long run without a subsidy.