The following graph represents a natural monopolist

The following graph represents a natural monopolist. Suppose that regulators have set the fair-return price at $3. Use the black point (cross symbol) to indicate the equilibrium under unregulated monopoly. Then use the grey point (star symbol) to indicate the equilibrium for the monopoly regulated by marginal cost pricing. Finally, use the purple point (diamond symbol) to indicate the equilibrium for the monopoly regulated by fair-return pricing. ? 7 + 6 Monopoly Pricing 5 MC Pricing 4 PRICE 3 Fair-Return Pricing LRAC 2 LRMC 1 MR D 0 0 1 2 3 4 5 6 7 8 QUANTITY
and produce If the monopolist is not regulated, pricing, it will charge a price of $ will charge a price of $ and produce units. If the monopolist is required to use marginal cost stay in business. units and thus Under which of the following pricing regulations will the monopolist stay in business? Check all that apply. Fair-return pricing Monopoly pricing Marginal cost pricing
Assume a regulatory agency is given authority over prices and entry conditions for a given industry. Also assume that the agency decides to allow new entry, as the Civil Aeronautics Board (CAB) did before airline deregulation, only when it is proven to be "necessary." Would this condition be expected to favor existing regulated firms, new entrants, or consumers? New entrants, because competition will increase and prices will decrease Existing regulated firms, because competition will decrease and prices will increase Consumers, because competition will increase and prices will decrease New entrants, because competition will decrease and prices will increase
Assume a natural monopolist is required to use marginal cost pricing, and a government subsidy covers the loss. What problems might be associated with a public subsidy? Check all that apply. Competition in the industry will increase, with new entrants seeking the subsidy. Voters might not like that public money is given to a private firm. The monopolist's profits decline, causing a shutdown. There is a disincentive to minimize costs.