The following graph depicts the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for a firm operating as a natural monopoly. Costs and Revenues (dollars) 80 70 60 30 20 10 0 Market for a Natural Monopoly MC Quantity ATC D MR 10 20 30 40 50 60 70 80 90 100 0 Instructions: Enter your answers as a whole number. a. If the firm is operating as a natural monopoly, what is the profit-maximizing level of output and price charged to consumers? $ and units will be sold b. At what price would the firm earn a normal profit? $ c. Suppose the government regulated the monopoly such that it were required to charge the perfectly competitive price. What is the regulated price? $

Consider the following firms. Would you regard any of them as a monopoly? Why or why not? Could you use the monopoly model in analyzing the choices of any of them? Explain. the best restaurant in town your barber or beautician your local cable company your campus bookstore Microsoft Amtrak the United States Postal Service

What is the profit maximizing quantity of output for this pure monopoly?

The graph illustrates an industry in which many firms operating in perfect competition are taken over by one firm that operates as a single-price monopoly. Draw the following shapes: 1) the consumer surplus arising from monopoly. Label it CS. 2) the deadweight loss arising from monopoly. Label it DWL 3) the loss of consumer surplus that is a gain to the monopoly as producer surplus. Label it Monopoly's gain. Indicate whether each of the following statements is true or false. At the competitive equilibrium, marginal social benefit equals marginal social cost. At the competitive equilibrium, the sum of consumer surplus and producer surplus is maximized. At the long-run competitive equilibrium, firms produce at the lowest possible long-run average cost. 30- 25- 20 15- 10- 5- Price and cost (dollars per haircut) 0+ 0.0 MR 1.0 2.0 3.0 4.0 Quantity (thousands of haircuts) MSC 5.0