Question - The graph below depicts a Natural Monopoly.
a. If this firm were unregulated at which price would it maximize its profits?
b. If threatened with the entry of a competitor what price would the existing firm charge? Explain.
c. Give an example of a company or industry that can be characterized as a Natural Monopoly. Explain (using an economic rationale, for example along the lines of the two questions above) why the government often regulates the pricing and output of these firms.