8/31/2023 0 Comments Raresoftware garage bandIn general then, for a natural monopoly, AC is said to decrease (as Q increases) through "some relevant range of market output". Suppose we also want to find the monopolist's If allowed to decide herself, how much will this natural monopolistĪnd price, this natural monopolist will produce where MR = MC:įind price by plugging Q* into the demand equation: We'll calculate the values for P* and Q* below, and also explain the meaning of the shaded areas. To do that, we use the formula (P - AC)Q. Before plugging things into this equation though, we must find AC. ![]() The value for AC is found by plugging Q* into the AC equation to get AC = $24.41 (i.e. To make these kind of profits (the area represented on the graph by the striped rectangle), the monopolist sets a price exceeding what might occur within a more competitive market. ![]() This high price makes consumer surplus (shaded yellow in the graph) rather small.
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