8. Natural monopoly analysis The following graph gives the demand (D) curve for satellite TV 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 satellite TV 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 subscription) 100 90 80 70 60 50 40 20 10 0 MR 6 10 12 14 QUANTITY (Number of subscriptions) O True 4 O False 16 ATC MC 18 D Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. The satellite TV company must own a scarce resource. The satellite TV company is experiencing diseconomies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. (?) True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
8. Natural monopoly analysis The following graph gives the demand (D) curve for satellite TV 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 satellite TV 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 subscription) 100 90 80 70 60 50 40 20 10 0 MR 6 10 12 14 QUANTITY (Number of subscriptions) O True 4 O False 16 ATC MC 18 D Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. The satellite TV company must own a scarce resource. The satellite TV company is experiencing diseconomies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. (?) True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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8. Natural monopoly analysis
The following graph gives the demand (D) curve for satellite TV 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 satellite TV 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 subscription)
100
90
80
70
60
50
40
30
20
10
0
+
2
Keep the Highest/3
4
O True
MR
6
8 10 12 14
QUANTITY (Number of subscriptions)
False
16
ATC
MO
18 20
D
Which of the following statements are true about this natural monopoly? Check all that apply.
Monopoly Outcome
The satellite TV company must own a scarce resource.
The satellite TV company is experiencing diseconomies of scale.
In order for a monopoly to exist in this case, the government must have intervened and created it.
It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
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