Question: The following graph represents a natural monopoly: a. Why is this firm considered a natural monopoly? b. If the firm is unregulated, what price and

The following graph represents a natural monopoly:

a. Why is this firm considered a natural monopoly?
b. If the firm is unregulated, what price and output would maximize its profit? What would be its profit or loss?
c. If a regulatory commission establishes a price with the goal of achieving allocative efficiency, what would be the price and output? What would be the firm€™s profit or loss?
d. If a regulatory commission establishes a price with the goal of allowing the firm a €œfair return,€ what would be the price and output? What would be the firm€™s profit or loss?
e. Which of the prices in parts b, c, and d maximizes consumer surplus? What problem, if any, occurs at this price?

Dollars per Unit LRAC In MC Demand MR Ouantitv

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