Aplia Homework: Chapter 15 9. Regulating a natural monopoly Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services, the company's marginal-revenue (MR), marginal-cost (MC), and average-total-cost (ATC) curves. 100 90 80 70 60 50 PRICE (Dollars per subscription) 40 ATC 30 MC 20 10 MR D 0 2 6 8 10 12 14 16 18 20 QUANTITY (Thousands of subscriptions)Suppose that the government has decided not to regulate this industry, and the rm is free to maximize prots, without constraints. Complete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization v L v v Marginal-Cost Pricing V L V v Average-Cost Pricing V L v v Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. True or False: Over time, the telephone company has a very strong incentive to lower costs when subject to average-cost pricing regulations. 0 True 0 False