Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it. The water company is experiencing economies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The water company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. O True O False
Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it. The water company is experiencing economies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The water company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. O True O False
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter14: Indirect Price Discrimination
Section: Chapter Questions
Problem 4MC
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Transcribed Image Text:Which of the following statements are true about this natural monopoly? Check all that apply.
In order for a monopoly to exist in this case, the government must have intervened and created it.
The water company is experiencing economies of scale.
It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
The water company is experiencing diseconomies of scale.
True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
True
False
Transcribed Image Text:8. Natural monopoly analysis
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
40
36
32
28
24
20
16
0
1
2
3
5
8
6 7
QUANTITY (Hundreds of cubic feet)
MR
4
ATC
MC
9
10
D
++
Monopoly Outcome
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