-Using a graph, show the price-output combination of a natural monopoly without regulation and the price-output combination if the government requires the monopoly to earn a normal rate of return. What are economic profits in each situation?
Definitions:
Returns To Scale
The change in output as all inputs are increased proportionally in the production process.
Inputs
The resources such as labor, materials, and capital that are used in the production process to create goods and services.
Returns To Scale
The rate at which output increases in response to proportional increases in all inputs or factors of production.
Production Function
An equation that describes the maximum amount of output that can be obtained from a given number of inputs.
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