Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8.13.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 8.13  Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8.13.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

In a natural monopoly, allowing the firm to break even means setting the price equal to average total cost (ATC). At Q3, the price P3 equals ATC, allowing the firm to cover all its costs without making a profit.

Figure 813 Figure 8