Figure 10-16

Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to figure 10-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Question

Figure 10-16
  
Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to figure 10-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Quizplus · Accepted Answer

The profit maximizing output is determined at the intersection of marginal revenue (MR) and marginal cost (MC) curves. In this case, the intersection point is Q1, where MR=MC. At this output level, the monopolist will charge the price corresponding to the point on the demand curve above Q1, which is P1. Therefore, the answer is B, Q1 units; P1.

Figure 10-16 Figure 10-16 Shows the Market Demand and Cost Curves Facing