To maximize profits, an unregulated natural monopolist would choose which combination of price and output in Figure 27.1?

Question

Quizplus · Accepted Answer

An unregulated natural monopolist maximizes profits at the output where Marginal Revenue (MR) equals Marginal Cost (MC). In Figure 27.1, the MC curve intersects the ATC curve at point S1U1B0. At this output level, the demand curve intersects the MR curve at point S1U1B12. Therefore, the monopolist would choose to produce output level QS1U1B12 and set a price of PS1U1B12 to maximize profits.

To Maximize Profits, an Unregulated Natural Monopolist Would Choose Which