1. For the case considered in the text where the cost function of a firm is C(q) = cq2 + f, find the level of industry output for which the industry is a natural triopoly.
2. Provide a diagram and explain why perfect competition is a natural n-opoly, where n is very large.
3. Assume that the costs of production are C(q) = cq + f and that the demand curve is P = A - Q.
(a) Show that the market is a normative natural monopoly.
(b) Show that whether it is a positive natural monopoly depends on the nature of competition postentry. For what values of f and A is the equilibrium market structure (assuming Cournot competition and free entry) a monopoly, duopoly, and triopoly?