The following graph shows the demand (D) for electricity services in the imagina

Question

The following graph shows the demand (D) for electricity services in the imaginary town of Utilityburg. The graph also shows the marginal (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 40 36 32 28 24 20 16 12 Monopoly Outcome MR QUANTITY (Thousands of kilowatt-hours) Which of the following statements are true about this natural monopoly? Check all that apply. The electricity company is experiencing diseconomies of scale

Explanation / Answer

The electricity company is experiencing economies of scale,

You can see in the graph the MC and ATC are coming to straight line, This shows that very large production is happening and economies of scale is already there

False

Monopolies almost always either make profits or losses but zero profit is not possible, It is because monopolies are created that way.

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