ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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
ATC-
MC-
MR
D
0
2
4
10 12 14 16
18
20
QUANTITY (Number of subscriptions)
Monopoly Outcome
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.
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Transcribed Image Text: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 ATC- MC- MR D 0 2 4 10 12 14 16 18 20 QUANTITY (Number of subscriptions) Monopoly Outcome 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.
80
80
PRICE (Dollars per subscription)
30
40
40
60
70
70
20
20
10
ATC
MC
monopoly outdom
MR
D
0
0
2
4
6 8 10 12 14 16
QUANTITY (Number of subscriptions)
18 20
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 satellite TV company is experiencing diseconomies of scale.
The satellite TV company is experiencing economies of scale.
The satellite TV company must own a scarce resource.
True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
O True
O False
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Transcribed Image Text:80 80 PRICE (Dollars per subscription) 30 40 40 60 70 70 20 20 10 ATC MC monopoly outdom MR D 0 0 2 4 6 8 10 12 14 16 QUANTITY (Number of subscriptions) 18 20 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 satellite TV company is experiencing diseconomies of scale. The satellite TV company is experiencing economies of scale. The satellite TV company must own a scarce resource. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. O True O False
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