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 will produce where marginal cost equals marginal revenue. The price and output combination of $0.12 and 1 million kwh per day likely represents this equilibrium point.

The Diagram Below Shows Cost and Revenue Curves for a Natural