Posted: May 11th, 2021

Suppose a natural monopolist has fixed costs of $15 and a constant marginal cost of $3. The demand for the product is as follows:

Price (per unit) |
$10 | $9 | $8 | $7 | $6 | $5 | $4 | $3 | $2 | $1 |

Quantity demanded (units per day) |
0 | 2 | 4 | 6 | 8 | 10 | 12 | 14 | 16 | 18 |

Under these conditions:

(a) What price and quantity will prevail if the monopolist isn’t regulated?

**Instructions:** Enter your responses rounded to the nearest whole number.

Price: $ [removed]

Quantity: [removed] units

(b) What price-output combination would exist with efficient pricing (MC = p)?

**Instructions:** Enter your responses rounded to the nearest whole number.

Price: $ [removed]

Quantity: [removed] units

(c) What price-output combination would exist with profit regulation (zero economic profits where price equals, or nearly equals, average total cost)?

**Instructions:** Enter your responses rounded to the nearest whole number.

Price: $ [removed]

Quantity: [removed] units

(d) Graph the demand curve for the natural monopolist.

**Instructions:**

1. Use the tool provided to draw the demand curve (Demand). This line should only contain the two endpoints.

2. To enter exact coordinates, double click on the point and enter the values of x and y.

2. To enter exact coordinates, double click on the point and enter the values of x and y.

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