Q9. Microeconomics

Complete the rst row of the Following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription} Prot Long-Run Decision Prot Maximization Y l V V Marginal-Cost Pricing V l V V Average-Cost Pricing V l V 7 Suppose now that the government decides. to require the monopolist to set its price equal to marginal cost. Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to average total cost. Complete the third row of the previous table. Under averagecost pricingJ the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a rm's costs decrease. Overtimer under the averagecost pricing policy. what will the local electric company most likely do? U Allow its costs to increase 0 Work to decrease its costs 9. Regulating a natural monopoly Consider the only electric companyr in a small town, which you can assume opeiates as a natural monopoly. The following graph shows the demand curve for electricityI services per monthJ as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATE) CUWE . PRICE (Dollarspersubsm'ption) l l [I 2 4 5 B 16 12 H 15 13 20 QUANTITY (Thousands of subscnplions) Suppose the government has elected not to impose regulations on the industry, and so the Firm faces no regulatory constraints in maximizing profits