3 Natural Monopoly In Lansing, Michigan, water is abundant, and the municipal supplier of water has only fixed costs, namely: TC = 100 + 8Q where Q is the number of households using the service. The (inverse) demand is given by P(Q) = 40 - 2Q. The provider behaves as a monopolist. 1. Given this information, what is the MC function of the water provider? Answer: since VC is 8Q, MC(Q) = 8. 2. Sketch the ATC and MC for the provider 0 Q3. Does the provider's cost structure exhibit economies or diseconomies of scale? 4. Compute the Marginal Revenue, MR. 5. What is the price, Natural, and quantity, @Natural, the provider will choose? 6. Compute the profit of the provider, 7Natural 7. Imagine that the Government forces the firm to act like a perfectly competitive firm (i.e., to produce at the perfectly competitive quantity). If the firm acted like a perfectly competitive (PC) one, what would Qpc and Ppc be