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The following graph shows the demand (D) for gas 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 gas 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.

Monopoly Outcome01234567891020181614121086420PRICE (Dollars per hundred cubic feet)QUANTITY (Hundreds of cubic feet)DMRMCATC4, 12

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

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

The gas company is experiencing economies of scale.

The gas company must own a scarce resource.

The gas company is experiencing diseconomies of scale.

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

True

False

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Richa Arora
Richa AroraLv10
28 Sep 2019

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Related questions

1. To maximize profits, a firm should produce output up to the point where

A. marginal revenue equals marginal cost

B. price equals marginal cost

C. the gap between the demand curve and the ATC is the greatest

D. all of the above

E. answers a and b, but not c

2. Which statement is false?

A. a profit maximizing firm will increase production when price exceeds marginal cost

B. the lowest point on a firm's short-run supply curve is at the shut-down point

C. A firm will operate at that ouput where MC equals MR only when it is maximizing profits

D. A profit-maximizing firm will decrease production when marginal cost exceeds price.

3. which statement is true?

A. all monopolies are good

B. All monopolies are bad

C. Most natural monopolies are government regulated or government owned

D. None of these statements is true

4. There are _____ limits to monopoly power

A. no

B. some

C. many

5. Which statement is true?

A. the monopolist's most efficient output is her most profitable output as well

B. the monopolist charges a higher price than the perfect competitor in the long run.

C. all monopolists have control over an essential resource.

D. none is true

6. As a firm grows larger

A. economies of scale set in, then diseconomies of scale.

B. diseconomies of scale set in, then economies of scale.

C. economies of scale and diseconomies of scale set in at the same time.

D. neither economies of scale nor diseconomies of scale set in.

7. A monopolist operates at the minimum point of her ATC curve

A. only in the short run

B. only in the long run

C. in both the short run and the long run

D. in neither the short run nor the long run

8. A natural monopoly

A. has an average cost curve that reaches minimum possible average cost at a low level of output.

B. has a marginal cost curve that is steeply upward slopoing.

C. is usually subject to antitrust suits

D is usually allowed to choose its price so as to maximize profits in the United States.

E. occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if two or more firms supplied the market.

9. For a monopolist, the price of the product

A. always equals the marginal revenue

B. is always less than the marginal revenue

C. exceeds the marginal revenue

D. always equals the marginal cost of the product

10. Monopolies are usually viewed with concern from an economic standpoint since

A. size is ingerently dangerous; the larger ther firm, the more likely it is to squeeze out the "little producer"

B. resources may be allocated in an efficient manner.

C. the government may be put at the mercy of several large producers

D. always equals the marginal cost of the product

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

A) The electricity company is experiencing diseconomies of scale.
B) The electricity company must own a scarce resource.
C) It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
D) In order for a monopoly to exist in this case, the government must have intervened and created it.

This was asked before but never answered:

This graph shows the demand for cable TV services in a town of 50,000 households. The local government has given a monopoly franchise to a cable company. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for cable TV services. Notice that the firm's monthly marginal cost is constant at $10 per household. Assume that in the long run, the cable company can avoid any fixed costs if it stops providing service in this community.

http://courses.aplia.com/problemsetassets/micro/Lemke_Monopoly_II/cable.gif

5.1. True or False: The firm has no fixed costs.

5.2. What price and quantity combination will the monopolist choose to maximize profits?

5.3. How much profit does the monopolist earn each month?

5.4. Suppose the government forces the cable company to set price equal to marginal cost. In the long run, how many households would the cable company choose to supply at this price?

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