AaBbCcDc AaBbCcl AaBbCcDc AaBbCcDd AaBbCcI AaBb( AaBb EEmphasis Heading 1 I Norm

Question

AaBbCcDc AaBbCcl AaBbCcDc AaBbCcDd AaBbCcI AaBb( AaBb EEmphasis Heading 1 I Normal Strong Subtitle Title No Sp raph Styles Answer questions 1. through 4. by referring to the graph below: $8 MC 0 40 50 60 708090 100 10 120 =P Quantity (thousands) The profit-maximizing quantity for this natural monopoly to produce will be a. 110 thousand b. 100 thousand c. 90 thousand d. 80 thousand 2 The profit-maximizing price for this natural monopoly to charge will be a. $2 b. $4 c. $6 d. $8 3. The optimal quantity of output for this natural monopoly to produce willbe a. 90 thousand b. 100 thousand c. 110 thousand d. 120 thousand 4. The optimal price for this natural monopoly to charge will be: a. $1 b. $2 c. $4 d. $6

Explanation / Answer

1. 80 thousand.

The profit maximizing price and output is where marginal revenue equals marginal cost, then it is extended to the market demand curve to determine what market price corresponds to that quantity.

2. $6.

3. $110. Socially optimal level is the point of intersection between MC and demand curve.

4.$2

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