CENGAGE | MINDTAP Homework (Ch 15) 9. Regulating a natural monopoly Consider the only internet service provider in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for internet services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. 100 90 80 70 60 50 PRICE (Dollars per subscription) 40 ATC 30 MC O MODO EER hpLEKS - Nicholas W. A ALEKS - Nicholas W. ALEKS-ONLINEQ.. C4ELink Log in to t. CENGAGE | MINDTAP Q Homework (Ch 15) 100 90 80 70 60 50 PRICE (Dollars per subscription) 40 ATC 30 MC 20 10 MR D 2 8 10 12 14 16 1 20 QUANTITY (Thousands of subscriptions) Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. MODO E EE hpcholas W. A ALEKS - Nicholas W. ALEKS - ONLINE Qu. ~ CAELink: Log in to t. CENGAGE | MINDTAP lomework (Ch 15) Complete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Exit the industry Average-Cost Pricing Stay in business Suppose now that the government decides to require the monopolist to set its price equal to marginal Stay or exit Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to average total cost. Complete the third row of the previous table. True or False: Over time, the internet service provider has a very strong incentive to lower costs when subject to average-cost pricing regulations. True O False O MO O E EE hp