Question 6

The table below shows demand and cost information for a natural monopoly Use the information in the table to answer the questions below: Price in $ Quantity Total Revenue in $ Marginal Revenue in S Marginal Cost in $ Average Total C 200 0 0 185 1 185 1 85 95 105 170 2 340 155 85 95 155 3 465 125 90 93 140 4 560 95 95 94 125 5 625 65 125 100 1 10 6 660 35 155 95 7 665 5 195 121 80 8 640 -25 255 158 Assuming no government intervention in this market: what would be the equilibrium price? If the government decided to regulate and set the price equal to average cost; the new price would be: In general, this type of regulation tends to cause the monopoly output to OIncrease Decrease OStay the same and its profit to CIncrease to 235 Decrease OStay the same