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Figure: Water Works
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators want the monopolist to cover average total cost, the monopolist will be allowed to charge a price of:
A) $5.
B) $6.
C) $13.
D) $21.

Question

Use the following to answer questions:
Figure: Water Works 
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators want the monopolist to cover average total cost, the monopolist will be allowed to charge a price of:
A) $5. 
B) $6. 
C) $13. 
D) $21.

Quizplus · Accepted Answer

In a natural monopoly, regulators often set prices where the firm covers its average total cost (ATC). This typically occurs where the price equals ATC, which in this case is $6.

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