8. Natural monopoly analysis The following graph shows the demand (D) for gas services In the imaginary town of Utilityburg. The graph also shows the marginal revenue (HR) curve, the marginal cost (MC) curve, and the average total cost (ATE) curve For the local gas company, a natural monopolist. On the following graph, use the blank point {plus symbol) to indicate the prot-maximizing price and quantity for this natural monopolist. so --|- 1:: ' E- 15 Monopon Outcome (.1 E 14 a 'U I: 12 I: ; 1n 5 Ant... D 9- 5 [h l.|J Q E a Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it. The gas company is experiencing economies of scale. The gas company is experiencing diseconomies of scale. The gas company must own a scarce resource. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. O True O False9. Regulating a natural monopoly Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. ? 100 90 80 70 50 PRICE (Dollars per subscription) 40 30 ATC 20 MC 10 MR D 0 2 6 8 10 12 14 16 18 20 QUANTITY (Thousands of subscriptions)Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing 8,000 Suppose that the government f monopolist to set the price equal to marginal cost. 15,000 Complete the second row of the 16,000 table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table.Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) ( Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing 20 Suppose that the government forces the monopolist to set th equal to marginal cost. 25 Complete the second row of the previous table. 29 Suppose that the government forces the monopolist to set th 60 qual to average total cost. Complete the third row of the previous table.Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Negative Suppose that the government forces the monopolist to set the price equal to marg Positive Complete the second row of the previous table. Zero Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table.Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Exit the industry Suppose that the government forces the monopolist to set the price equal to marginal cost. Stay in business Complete the second row of the previous table. Stay or exit Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table.True or False: Over time, the cable company has a very strong incentive to lower costs when subject to average-cost pricing regulations. True OFalse