Question

 8. Natural monopoly analysis

 The following graph shows the demand (D) for electricity services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local electricity company, a natural monopolist.

 On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.

 Which of the following statements are true about this natural monopoly? Check all that apply.

•  The electricity company is experiencing economies of scale.

•  The electricity company must own a scarce resource.

•  The electricity company is experiencing diseconomies of scale.

•  It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.

 True or False: Without government regulation, natural monopolies always earn zero profit in the long run. 

•  True

•  False

Answer 1

Select First & Fourth statement

Given statement is TRUE