Figure 15-16

Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Question

Figure 15-16
  
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Quizplus · Accepted Answer

If the regulators allow the firm to break even on their investment, the firm will produce where marginal cost (MC) intersects with the demand (D) curve, which is at Q₃ units. The price charged will be where the demand curve intersects with the average total cost (ATC) curve, which is at P₄. Therefore, the correct answer is D.

Figure 15-16 Figure 15-16 Shows the Market Demand and Cost Curves Facing