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3. Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demand for the product is as follows:
Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1
Quantity demanded (units per day) 0 2 4 6 8 10 12 14 16 18
Under these conditions,
(a) What price and quantity will prevail if the monopolist isnt regulated? (a1) price (a2) quantity
(b) What price-output combination would exist with efficient pricing (MC 5 p)? (b1) price (b2) quantity
(c) What price-output combination would exist with profit regulation (zero economic (c1) price profits)? (c2) quantity
Illustrate your answers on the graph below.
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