The following graph shows the demand (D) for cable services in the imaginary town of Utilityburg. The graph also shows the margi

Question

1 year ago

8

The following graph shows the demand (D) for cable services in the imaginary town of Utilityburg. The graph also shows the margi

nal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable company, a natural monopolist.
On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.

Which of the following statements are true about this natural monopoly? Check all that apply.

The cable company must own a scarce resource.
In order for a monopoly to exist in this case, the government must have intervened and created it.
The cable company is experiencing diseconomies of scale.
The cable company is experiencing economies of scale.
True or False: Without government regulation, natural monopolies can earn positive profit in the long run.

True
False

Business

1 answer:

alexdok [17] · Answer 1 · 2023-11-06T20:46:08+03:00

The true statement about this natural monopoly is that It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.

Also, it is a true statement that natural monopolies can earn positive profit in the long run without the government regulation.

<h3>What is a natural monopolies?</h3>

This refers to the type of monopoly that exists in a particular market if a single firm can serve that market at lower cost than any combination of two or more firms.

It mostly occurs when when the most efficient number of firms in the industry is one. Also, a natural monopoly will ideally have very high fixed costs implying that it is impractical to have multiple firms producing the good.

A very good example of a natural monopoly is the case of tap water.

Hence, the true statement about this natural monopoly is that It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers and it is a true statement that natural monopolies can earn positive profit in the long run without the government regulation.

Therefore, the answers are Option B and True.