19.9 The demand for telephones in a midsize city is given by Q= 1,000 - 50P, where Qis the number of homes buying service (in thousands) and Pis the monthly connect charge (in dollars). Phone system costs are given by TC = 500 In (AQ- 20) for Q> 200.

a. Is telephone production a natural monopoly in this city?

b. What output level will an unregulated monopoly produce in this situation? What price will be charged? What will monopoly profits be?

c. If there is active (contestable) competition for the city franchise, what price will prevail?