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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. 20 18 Monopoly Outcome 16 14 12 10 ATC MC 2 MR 1 2 4 5 6 7 8 10 QUANTITY (Hundreds of cubic feet) Which of the following statements are true about this natural monopoly? Check all that apply. O The gas company is experiencing economies of scale. O The gas company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. O In order for a monopoly to exist in this case, the government must have intervened and created it. PRICE (Dollars per hundred cubic feet) O O

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. 20 18 Monopoly Outcome 16 14 12 10 ATC MC 2 MR 1 2 4 5 6 7 8 10 QUANTITY (Hundreds of cubic feet) Which of the following statements are true about this natural monopoly? Check all that apply. O The gas company is experiencing economies of scale. O The gas company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. O In order for a monopoly to exist in this case, the government must have intervened and created it. PRICE (Dollars per hundred cubic feet) O O

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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I'm having a hard time understanding if the monopoly outcome I have drawn on the graph (the dotted line) is correct. Is this how you would do it, and if you would do it differently, how would you do it? Additionally, I am having a hard time understanding which of the options below the chart is correct to select and why. I believe it is possible for there to be more than one correct option. Thank you!

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. 20 18 Monopoly Outcome 16 14 12 10 8 6 АТС 4 MC 2 MR D 1 3 4 5 6 7 8 9 10 QUANTITY (Hundreds of cubic feet) Which of the following statements are true about this natural monopoly? Check all that apply. U The gas company is experiencing economies of scale. U The gas company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. O In order for a monopoly to exist in this case, the government must have intervened and created it. PRICE (Dollars per hundred cubic feet)
Transcribed Image Text: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. 20 18 Monopoly Outcome 16 14 12 10 8 6 АТС 4 MC 2 MR D 1 3 4 5 6 7 8 9 10 QUANTITY (Hundreds of cubic feet) Which of the following statements are true about this natural monopoly? Check all that apply. U The gas company is experiencing economies of scale. U The gas company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. O In order for a monopoly to exist in this case, the government must have intervened and created it. PRICE (Dollars per hundred cubic feet)
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