The Figure Below Shows the Cost and Revenue Curves for a Natural

question 25

Multiple Choice

The figure below shows the cost and revenue curves for a natural monopolist. Suppose the monopolist was originally producing at a profit-maximizing output level. If regulators set price equal to marginal cost, the price will change from: ​
Figure 15.1
​

• A)$24 to $18, and quantity will increase from 5 units to 8 units.
• B)$14 to $20, and quantity will increase from 5 units to 8 units.
• C)$24 to $18, and quantity will remain unchanged.
• D)$18 to $14, and quantity will increase from 5 units to 8 units.
• E)$24 to $22, and quantity will increase from 5 units to 10 units.

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Definitions:

Marginal Cost

The increase in cost that comes from making one more unit of a product or service.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to a balance in the market.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply equals demand.

Collusion

A secret or illegal cooperation or conspiracy, especially between parties to cheat or deceive others, commonly in the context of firms agreeing on prices or market shares.