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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Use the accompanying figure to answer questions 2-4.

images

4. Which quantity in the figure is consistent with profit regulation? With price regulation? Explain your answers.

To determine

Determine the quantity in the figure that is consistent with profit regulation and price regulation.

Explanation

Figure-1 shows the natural monopoly market as follows:

In Figure-1, the horizontal axis measures the quantity and the vertical axis measures the price.

According to the profit regulation, the government will regulate the profit of the firm by charging the marker price equal to the average total cost (ATC), where the natural monopoly earns zero economic profit...

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