Price (dollars per unit) 24 21 18 16 12 0 4 $12 to $18. $18 to $24. $12 to $18. 8 $12 to $24. MR 12 In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make the regulator believe its costs are LRAC (inflated), then the price the firm charges will increase from LRAC (inflated) LRAC MC D 16 20 Quantity (millions)

Price (dollars per unit) 24 21 18 16 12 0 4 $12 to $18. $18 to $24. $12 to $18. 8 $12 to $24. MR 12 In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make the regulator believe its costs are LRAC (inflated), then the price the firm charges will increase from LRAC (inflated) LRAC MC D 16 20 Quantity (millions)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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