omework: Chapter $12$

Attempts Average $/2$

$7.$ 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.

Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.

Complete the first row of the following table.

Short Run

Suppose that the government forces the monopolist to set the price equal to marginal cost.