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 gas company must own a scarce resource. The gas 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.

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8. Natural monopoly analysis
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.
16
16
PRICE (Dolars per hundred cubic feet
14
12
10
A
#
MR
a
D
A
QUANTITY Hundreds of cubic feet
ATO
a 12
D
+
Monopoly Outcome
Transcribed Image Text:8. Natural monopoly analysis 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. 16 16 PRICE (Dolars per hundred cubic feet 14 12 10 A # MR a D A QUANTITY Hundreds of cubic feet ATO a 12 D + Monopoly Outcome
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 gas company must own a scarce resource.
The gas company is experiencing diseconomies of scale.
In order for a monopoly to exist in this case, the government must have intervened and created it.
(Hundreds of cubic feet)
True or False: Without government regulation, natural monopolies never earn zero profit in the long run.
O True
False
Transcribed Image Text: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 gas company must own a scarce resource. The gas company is experiencing diseconomies of scale. In order for a monopoly to exist in this case, the government must have intervened and created it. (Hundreds of cubic feet) True or False: Without government regulation, natural monopolies never earn zero profit in the long run. O True False
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