Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
-Refer to Figure 15-3.Which of the following price and output combinations would an unregulated monopolist choose?
A)P2,Q2
B)P1,Q1
C)P3,Q2
D)P4,Q3

Question

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. 
-Refer to Figure 15-3.Which of the following price and output combinations would an unregulated monopolist choose?
A)P2,Q2 
B)P1,Q1 
C)P3,Q2 
D)P4,Q3

Quizplus · Accepted Answer

An unregulated monopolist will choose the output level where marginal cost equals marginal revenue, which occurs at point Q3. At this point, the monopolist will charge price P4, which is higher than the minimum average cost. This combination of output and price will maximize the monopolist's profits.

Use the Following Table to Answer the Question : Table