ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Economics
8. Natural monopoly analysis
The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR)
curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas 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 hundred cubic fe
0
1
MR
2
3
5
6
7
8
QUANTITY (Hundreds of cubic feet)
True
ATC
MC
O False
9
10
D
Which of the following statements are true about this natural monopoly? Check all that apply.
It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
In order for a monopoly to exist in this case, the government must have intervened and created it.
The gas company must own scarce resource.
The gas company is experiencing diseconomies of scale.
Monopoly Outcome
True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
WHICH OF THE FOLLOWING STATEMENTS IS
TRUE?
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Transcribed Image Text:Economics 8. Natural monopoly analysis The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas 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 hundred cubic fe 0 1 MR 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) True ATC MC O False 9 10 D Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. In order for a monopoly to exist in this case, the government must have intervened and created it. The gas company must own scarce resource. The gas company is experiencing diseconomies of scale. Monopoly Outcome True or False: Without government regulation, natural monopolies never earn zero profit in the long run. WHICH OF THE FOLLOWING STATEMENTS IS TRUE?
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