-If the natural monopoly shown in the figure above is unregulated, it will make an economic profit of
A) $2 million.
B) $4 million.
C) $9 million.
D) $0, that is, it earns a normal profit.

Question

-If the natural monopoly shown in the figure above is unregulated, it will make an economic profit of
A) $2 million. 
B) $4 million. 
C) $9 million. 
D) $0, that is, it earns a normal profit.

Quizplus · Accepted Answer

The natural monopoly will make an economic profit of $2 million if it is unregulated. This is because the natural monopoly has a downward-sloping demand curve and a marginal cost curve that is below the demand curve. This means that the natural monopoly can charge a price that is above its marginal cost and still make a profit.

-If the Natural Monopoly Shown in the Figure Above Is