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7. Natural monopoly analysis The following graph shows the demand (D) for electricity 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 electricity 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. 40 36 Monopoly Outcome 32 28 24 20 16 12 ATC MC MR 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) PRICE (Cents per Kilowatt-hour) HW#5 (Monopoly, Monopolistic Competition, Oligopoly) 20 16 12 ATC 4 MC MR 0 1 2 3 4 5 6 7 8 10 QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. The electricity company is experiencing economies of scale. O It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The electricity company must own a scarce resource. The electricity company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies always earn zero profit in the long run. True False PRICE (Cents per Kilo

7. Natural monopoly analysis The following graph shows the demand (D) for electricity 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 electricity 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. 40 36 Monopoly Outcome 32 28 24 20 16 12 ATC MC MR 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) PRICE (Cents per Kilowatt-hour) HW#5 (Monopoly, Monopolistic Competition, Oligopoly) 20 16 12 ATC 4 MC MR 0 1 2 3 4 5 6 7 8 10 QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. The electricity company is experiencing economies of scale. O It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The electricity company must own a scarce resource. The electricity company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies always earn zero profit in the long run. True False PRICE (Cents per Kilo

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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7. Natural monopoly analysis The following graph shows the demand (D) for electricity 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 electricity 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. 40 36 Monopoly Outcome 32 28 24 20 16 12 ATC MC MR 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) PRICE (Cents per Kilowatt-hour)
Transcribed Image Text:7. Natural monopoly analysis The following graph shows the demand (D) for electricity 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 electricity 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. 40 36 Monopoly Outcome 32 28 24 20 16 12 ATC MC MR 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) PRICE (Cents per Kilowatt-hour)
HW#5 (Monopoly, Monopolistic Competition, Oligopoly) 20 16 12 ATC 4 MC MR 0 1 2 3 4 5 6 7 8 10 QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. The electricity company is experiencing economies of scale. O It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The electricity company must own a scarce resource. The electricity company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies always earn zero profit in the long run. True False PRICE (Cents per Kilo
Transcribed Image Text:HW#5 (Monopoly, Monopolistic Competition, Oligopoly) 20 16 12 ATC 4 MC MR 0 1 2 3 4 5 6 7 8 10 QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. The electricity company is experiencing economies of scale. O It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The electricity company must own a scarce resource. The electricity company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies always earn zero profit in the long run. True False PRICE (Cents per Kilo
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