Question

Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company’s marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves.
0
2
4
6
8
10
12
14
16
18
20
100
90
80
70
60
50
40
30
20
10
0
PRICE (Dollars per subscription)
QUANTITY (Thousands of subscriptions)
D
MR
MC
ATC
Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
Complete the first row of the following table.
Pricing Mechanism
Short Run
Long-Run Decision
Quantity
Price
Profit
(Subscriptions)
(Dollars per subscription)
Profit Maximization
Marginal-Cost Pricing
Average-Cost Pricing
Suppose that the government forces the monopolist to set the price equal to marginal cost.
Complete the second row of the previous table.
Suppose that the government forces the monopolist to set the price equal to average total cost.
Complete the third row of the previous table.
True or False: Under the average-cost pricing policy, the cable company has no incentive to cut costs.

True
False

Answer 1

Answer:

true is the answer

Explanation:

hope it helps