Consider a graph of a natural monopoly: MC C MR mire where a=23; the slope of the inverse demand is -0.001 and MC is constant and equal to 4. Find the price that natural monopolist will charge optimally if it is not regulated by the government and just maximizes the profit, Now assume that the government regulates the natural monopoly using the MC rule (so, government ensures that monopoly produces the socially optimal level of output). Calculate the quantity monopolist will produce in that case.

Consider a graph of a natural monopoly: MC C MR mire where a=23; the slope of the inverse demand is -0.001 and MC is constant and equal to 4. Find the price that natural monopolist will charge optimally if it is not regulated by the government and just maximizes the profit, Now assume that the government regulates the natural monopoly using the MC rule (so, government ensures that monopoly produces the socially optimal level of output). Calculate the quantity monopolist will produce in that case.

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 29CTQ: Imagine that you ale managing a small firm and thinking about entering the market of a monopolist....

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