ln a natural monopoly market, the market demand (D), the marginal cost (MC) and the average total cost (ATC) of the monopolist are plotted in the diagram provided below. Assume the monopolist is the least powerful type of monopolist. 20 40 60 ED 100 120 140 Q (a) Add whatever necessary to the diagram to help you explain how you can detennine the prot-maximizing output and price of this monopolist. Calculate the prot and mark the area in the diagram provided. Explain whether this monopolist is productive efcient and allocative efcient. (8 marks] Answers: Output = 50, Price = 35?. Prot = $100 (b) How can the government restore allocative efciency in this market? Add whatever necessary to the diagram to help you explain how that policy can be implemented. ls there any shortcoming of this policy? [7 marks} Answers: MC-pricing with price-ceiling set at $2 and output at 120, but the loss is $240 (c) Can you propose a sustainable compromise as an alternative to the policy recommended in part lb]? Add whatever necessary to the diagram to help you explain how this alternative policy can be implemented. Why this policy ends up in a \"lose-Iose-lose-lose" situation? (10 marks) Answers: AC-pricing with price-ceiling set at $5 and output at 90