Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Question

Figure 15-16  Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Quizplus · Accepted Answer

When regulators allow a natural monopoly to break even, the firm sets price equal to average total cost (ATC). At Q3, the price P4 equals ATC, allowing the firm to break even.

Figure 15-16 Figure 15-16 Shows the Market Demand and Cost