The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1

In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-Why do the regulated companies oppose deregulation?
A)They would be deprived of an opportunity to compete with other firms.
B)They would be deprived of their rights to continue business.
C)They would be denied any kind of support from the government.
D)They would incur losses on account of increased competition.
E)They would become unpopular as they would no longer be controlled by the government.

Question

The figure below shows revenue and cost curves of a natural monopoly firm.Figure 14.1
​
  In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-Why do the regulated companies oppose deregulation?
A)They would be deprived of an opportunity to compete with other firms. 
B)They would be deprived of their rights to continue business. 
C)They would be denied any kind of support from the government. 
D)They would incur losses on account of increased competition. 
E)They would become unpopular as they would no longer be controlled by the government.

Quizplus · Accepted Answer

Regulated companies oppose deregulation because it would lead to increased competition in the market, which could result in decreased profits or even losses for the company. As a natural monopoly firm, this particular company has high fixed costs and low marginal costs, which means that it can produce at a lower average cost than any potential competitors. If other firms are allowed to enter the market, they may be able to produce at a lower cost, leading to lower prices for consumers and potentially lower profits for the natural monopoly firm. Therefore, regulated companies prefer to remain under government control and protection to ensure their continued profitability.

The Figure Below Shows Revenue and Cost Curves of a Natural