Economics: Natural Monopoly Consider a rm whose total cost is c(q) = c1,(q) + there F > 0 denotes for the fixed cost. We assume that cv(q) = m - q, where m 2 0 is a fixed number. (1) Show that the average cost is always decreasing, and marginal cost is always below average cost. (2) Suppose a leading firm entered the industry one year ago and it has been earning high profits (greater than F). Suppose there has not been technology improvement in this industry during the last year. Now another firm is considering entering the industry. Would the new firm survive the competition? Explain shortly. (3) My teaching assistant tells me that Microsoft (a software company in US) is a leading firm and has high operational leverage. What does she mean with this? (4) It seems that there are several firms competing with Microsoft. However, our theory predicts that this industry is likely a monopoly. Why is the reality different from our theory? Please give at least two reasons