An unregulated natural monopolist would produce to the point at which

Question

Quizplus · Accepted Answer

An unregulated natural monopolist would produce where its marginal revenue (MR) equals marginal cost (MC). This is because the monopolist faces a downward sloping demand curve, and producing more will lower the price it can charge for each unit sold. However, as a natural monopolist, it has lower average costs than any potential competitor, which means that the monopolist can charge a price higher than its average cost (AC) and still make a profit. Therefore, the monopolist will set its price where MR=MC, producing a quantity where demand intersects with the monopolist's MC curve.

An Unregulated Natural Monopolist Would Produce to the Point at Which