What would be the firms profit or loss

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Reference no: EM1315182

Q. The subsequent graph represents a natural monopoly.

a. Why this firm considered a natural monopoly? Because (Long Run) Average Cost is always downward-sloping.

b. If the firm is unregulated, Illustrate what price also output would maximize its profit? Illustrate what would be its profit or loss?

c. If a regulatory commission establishes a price with the goal of achieving allocative efficiency, Illustrate what would be the price also output? Illustrate 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 "fair return," Illustrate what would be the price also output? Illustrate what would be the firm's profit or loss?

e. Which one of the prices in parts b, c also d maximizes consumer surplus? Illustrate what problem, if any, occurs at this price?

Reference no: EM1315182

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