Figure 15-20 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-20. In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Question

Quizplus · Accepted Answer

In the absence of government regulation, profit-maximizing firms will produce at the quantity where marginal cost (MC) equals marginal revenue (MR). In the figure referenced, this occurs at Q2 units. The price charged will be at the demand curve (D) at this quantity, which is P2.

Figure 15-20 Shows the Market Demand and Cost Curves Facing