1. Suppose a natural monopolist has fixed costs of $50 and a constant marginal cost of $10. The demand for the product is as follows:
Price ($) $100 90 80 70 60 50 40 30 20 10
Quantity demanded per day 0 5 10 15 20 25 30 35 40 45
a) What price and quantity will prevail if the monopolist isn’t regulated?
b) What price-output combination would exist with efficient pricing (MC = P)?
2. Draw a graph with MC, Demand curve and MR curves for the problem above. Show the price-output combination for each of the questions (a) and (b) above.