Microeconomics question: Consider the special case and assume that for a natural monopolist the marginal cost...

Microeconomics question:

Consider the special case and assume that for a natural monopolist the marginal cost is constant and there is high fixed cost. Show graphically how the natural monopolist maximizes economic profits. At the point of profit maximization, what is the monopoly price and what is the monopoly quantity? Suppose now the natural monopoly is regulated. What is the best-regulated price? What happens to economic profits with the regulation? How is the consumer surplus changed due to the regulation? Show graphically.

Expert Solution

Rahul Sunny answered 5 months ago

Assume a monopolist firm with diminishing marginal product. Graph the marginal cost curve. Graph the firm...

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