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 ༄ ྴ་ཆ་ཥ་བྷྲ་ཛྙྰ་བྷུ་ཞ་གླུ་ཋ་ ATC MC MR D 0 0 2 4 6 8 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. The satellite TV company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The satellite TV company is experiencing diseconomies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False
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 ༄ ྴ་ཆ་ཥ་བྷྲ་ཛྙྰ་བྷུ་ཞ་གླུ་ཋ་ ATC MC MR D 0 0 2 4 6 8 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. The satellite TV company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The satellite TV company is experiencing diseconomies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False
Chapter1: Making Economics Decisions
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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
༄ ྴ་ཆ་ཥ་བྷྲ་ཛྙྰ་བྷུ་ཞ་གླུ་ཋ་
ATC
MC
MR
D
0
0
2
4
6
8
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.
The satellite TV company must own a scarce resource.
It is more efficient on the cost side for one producer to exist in this market rather than a
large number of producers.
The satellite TV company is experiencing diseconomies of scale.
In order for a monopoly to exist in this case, the government must have intervened and
created it.
True or False: Without government regulation, natural monopolies never earn zero profit in the
long run.
True
False
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