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 0 0 MR 6 B ATC MC- 10 D Monopoly Outcome
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 0 0 MR 6 B ATC MC- 10 D Monopoly Outcome
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter13: Antitrust And Regulation
Section: Chapter Questions
Problem 10SQP
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Transcribed Image Text: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 water company is experiencing diseconomies of scale.
The water company must own a scarce resource.
In order for a monopoly to exist in this case, the government must have intervened and created it.
True or False: Without government regulation, natural monopolies can earn positive profit in the short run.
True
False
Transcribed Image Text: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
8
4
0
0
2
MR
3
5
6
16
QUANTITY (Hundreds of cubic feet)
ATO
MC-
19
10
D
+
Monopoly Outcome
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