8. Natural monopoly analysisThe following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginalrevenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist.On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.PRICE (Dollars per hundred cubic feet)40363228242016128400 1MR782 3 4 5 6QUANTITY (Hundreds of cubic feet)ATCMC9 10D+Monopoly Outcome? Which of the following statements are true about this natural monopoly? Check all that apply.The water company is experiencing economies of scale.The water company is experiencing diseconomies of scale.In order for a monopoly to exist in this case, the government must have intervened and created it.It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.True or False: Without government regulation, natural monopolies always earn zero profit in the long run.TrueFalse

A monopoly is a type of market where there is only a single seller and many buyers. Thus there is a…

8. Natural monopoly analysis The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 40 36 32 28 24 20 16 12 4 0 0 1 MR 4 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) ATC MC 9 10 D + Monopoly Outcome ?