Instructions: Sketch a graph for a monopolist experiencing each of the following scenarios.

• Maximizing its profits

• Minimizing its losses (but still operating). Identify two factors that could turn a profit-earning monopolist into a loss-minimizing monopolist.

• Maximizing its revenues

• Not maximizing its profits and producing in the elastic range of its demand curve. (Tough one see if you can figure it out)

• Not maximizing its profits and producing in the inelastic range of its demand curve. (Tough one) Explain why this firm could do better by raising its price.

• Producing at the profit-maximizing quantity but just breaking even.

• A natural monopoly producing at its profit-maximizing quantity and price. Give an example of a natural monopoly that produces an essential good and explain why such an outcome would be harmful to society as a whole.

• A regulated natural monopoly producing at the fair return price (AC=AR) and quantity. What kind of government regulation would achieve this?

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• A regulated natural monopoly producing at the socially optimal price and quantity. What kind of regulation(s) would achieve this?