Figure 10.1
The revenue and cost curves in the diagram above are those of a natural monopoly.
-Refer to Figure 10.1. The minimum feasible price is ________.

Question

Quizplus · Accepted Answer

The minimum feasible price is the point where the average total cost (ATC) curve intersects with the demand curve, which is at point P3 in the diagram. Any price lower than P3 would result in negative economic profits for the monopoly. While P1 and P2 may be profitable in the short run, they do not cover the monopoly's long run costs and would result in exit from the market. P4 is above the point where demand is elastic, so it would result in lower profits for the monopoly compared to a price of P3.

Figure 10.1 The Revenue and Cost Curves in the Diagram Above Are