8. Natural monopoly analysis The following graph shows the demand (D) for electricity services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local electricity 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. 40 36 Monopoly Outcome 32 20 16 АТС -МС 12 8 MR D 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Thousands of kilowatt-hours) 28 24 PRICE (Cents per Kilowatt-hour) Monopoly Outcome 32 28 24 20 16 ATC MC 8 4 MR D 0 0 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The electricity company is experiencing economies of scale. The electricity company is experiencing diseconomies of scale The electricity company must own a scarce resource. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False PRICE (Cents per Kilowatt-hour)
8. Natural monopoly analysis The following graph shows the demand (D) for electricity services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local electricity 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. 40 36 Monopoly Outcome 32 20 16 АТС -МС 12 8 MR D 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Thousands of kilowatt-hours) 28 24 PRICE (Cents per Kilowatt-hour) Monopoly Outcome 32 28 24 20 16 ATC MC 8 4 MR D 0 0 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The electricity company is experiencing economies of scale. The electricity company is experiencing diseconomies of scale The electricity company must own a scarce resource. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False PRICE (Cents per Kilowatt-hour)
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter9: Monopoly
Section: Chapter Questions
Problem 33P: Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the...
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Transcribed Image Text:8. Natural monopoly analysis
The following graph shows the demand (D) for electricity services in the imaginary town of Utilityburg. The graph also shows the marginal revenue
(MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local electricity 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.
40
36
Monopoly Outcome
32
20
16
АТС
-МС
12
8
MR
D
0
0
1
2
3
4
5
6
7
8
9
10
QUANTITY (Thousands of kilowatt-hours)
28
24
PRICE (Cents per Kilowatt-hour)
Transcribed Image Text:Monopoly Outcome
32
28
24
20
16
ATC
MC
8
4
MR
D
0
0
1
2
3
4
5
6
7
10
QUANTITY (Thousands of kilowatt-hours)
Which of the following statements are true about this natural monopoly? Check all that apply.
It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
The electricity company is experiencing economies of scale.
The electricity company is experiencing diseconomies of scale
The electricity company must own a scarce resource.
True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
True
False
PRICE (Cents per Kilowatt-hour)
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