To maximize profit, a natural monopolist produces the level of output at which:
a. marginal cost equals the minimum of long-run average total cost.
b. Price equals average total cost
c. All of the given choices
d. Marginal revenue equals marginal cost
A natural monopoly is a firm that can produce the entire output of the market at a cost lower than what it would be if the output was provided by 2 or more firms. If a firm is a natural monopoly, then it is more efficient to serve the entire market than having multiple firms in the market. For example, the water and electrical utility company which provide water and electric supply in the United States are natural monopolies.
Answer and Explanation:
- To maximize the profit, an unregulated natural monopolist would produce up to the point where the marginal revenue equals the marginal...
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from Intro to Business: Help and ReviewChapter 3 / Lesson 13