The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day. FIGURE 12-7
-Refer to Figure 12-7.If this firm were unregulated and profit maximizing,its price and output would be ________ per kwh and ________ kwh per day.
A)$0.08; 1.5 million
B)$0.09; 1.4 million
C)$0.12; 1 million
D)$0.11; 1 million
E)$0.07; 1.5 million

Question

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.  FIGURE 12-7
-Refer to Figure 12-7.If this firm were unregulated and profit maximizing,its price and output would be ________ per kwh and ________ kwh per day.
A)$0.08; 1.5 million 
B)$0.09; 1.4 million 
C)$0.12; 1 million 
D)$0.11; 1 million 
E)$0.07; 1.5 million

Quizplus · Accepted Answer

In a profit-maximizing scenario, a firm sets output where marginal cost equals marginal revenue. The price is then determined by the demand curve at this output level.

The Diagram Below Shows Cost and Revenue Curves for a Natural