9. Regulating a natural monopoly Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. 100 PRICE (Dollars per subscription) • 8 8 8 8 8 8 8 8 80 20 10 0 2 MR 10 12 QUANTITY (Thousands of subscriptions) 14 16 ATC MC- ? Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
9. Regulating a natural monopoly Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. 100 PRICE (Dollars per subscription) • 8 8 8 8 8 8 8 8 80 20 10 0 2 MR 10 12 QUANTITY (Thousands of subscriptions) 14 16 ATC MC- ? Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
Chapter13: Monopoly And Antitrust
Section: Chapter Questions
Problem 6P
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