Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demand for the product is as follows:
Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1
Quantity demanded
(units per day) 0 2 4 6 8 10 12 14 16 18
Under these conditions,
(1) What price and quantity will prevail if the monopolist isn't regulated
(a) price _______
(b) quantity _______
(2) What price-output combination would exist with efficient pricing (MC = p )?
(a) price _______
(b) quanitity _______
(3) What price-output combination would exist with profit regulation (zero economic profits)?
(a) price _______
(b) quanitity _______
Illustrate your answers on the graph.