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 p 40 36 32 28 24 20 16 0 0 1 O True 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 O False ATC MC 9 10 D 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 must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. 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 always earn zero profit in the long run.
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 p 40 36 32 28 24 20 16 0 0 1 O True 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 O False ATC MC 9 10 D 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 must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. 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 always earn zero profit in the long run.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
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