Home / Questions / 8. Natural monopoly analysis The following graph shows the demand (D) for gas services in ...
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. 20 18 Monopoly Outcome 16 14 12 8 ATC MC 2 D MR 0 0 1 3 5 6 7 8 9 10 QUANTITY (Hundreds of cubic feet) PRICE (Dollars per hundred cubic feet) 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. In order for a monopoly to exist in this case, the government must have intervened and created it. The gas company is experiencing diseconomies of scale. The gas company is experiencing economies of scale True or False: Without government regulation, natural monopolies can earn positive profit in the short run True False
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