a) Explain in writing and graphically why natural monopolies occur.

b) Explain further and show how the natural monopoly maximizes profits. Of course you need to show the selected price and quantity produced in the graph.

c) What happens to the prices of the product / service if the Swedish Competition Authority (Swedish authority that relegates competition between companies) forces on the natural monopoly to split into many smaller companies. Explain and show in the graph.

d) I now claim that authorities can increase economic welfare by regulating this

natural monopolies. Explain a way to regulate. What will be the price and quantity at an optimal regulation?