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. The water company is experiencing economies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. The water company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies can earn positive profit in the long run. True False
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. The water company is experiencing economies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. The water company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies can earn positive profit in the long run. True False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph gives the demand (D) curve for water 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 water 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 feet)
40
36
32
28
24
20
16
12
4
0
0
1
+
2
4
MR
3
5
6
7
8
QUANTITY (Hundreds of cubic feet)
O True
O False
ATC
MC
9
10
D
Which of the following statements are true about this natural monopoly? Check all that apply.
Monopoly Outcome
It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
The water company is experiencing economies of scale.
In order for a monopoly to exist in this case, the government must have intervened and created it.
The water company is experiencing diseconomies of scale.
True or False: Without government regulation, natural monopolies can earn positive profit in the long run.
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