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

In the absence of any government regulation, the profit-maximizing owners of this firm will produce where marginal cost equals marginal revenue, which is at point E. From this point, the monopolist will charge the price corresponding to point F on the demand curve. Therefore, the monopolist will produce Q2 units and charge a price of P2.

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