Regulating Monopoly Activity 37

$5.00 1,000 $4.00 $3.00 $2.00 $1.00 2,0003,0004,0005,000 Costs/Revenue Quantity MC ATC DMR

$5.00 1,000 $4.00 $3.00 $2.00 $1.00 2,0003,0004,0005,000 Costs/Revenue Quantity MC ATC D MR Unregulated Monopoly P>MC Output: 1,500 Price: $4.00 TR: (4x1500) $6,000. TC: (3x1500) $4,500. Per unit profit: $1.00

$5.00 1,000 $4.00 $3.00 $2.00 $1.00 2,0003,0004,0005,000 Costs/Revenue Quantity MC ATC DMR Marginal Cost Pricing P=MC Socially Optimal Price Output: 3,000 Price: $1.50 TR: (1.5x3000) $4,500. TC: (2.5x3,000) $7,500. total loss: $3,000

$5.00 1,000 $4.00 $3.00 $2.00 $1.00 2,0003,0004,0005,000 Costs/Revenue Quantity MC ATC DMR Cost of Service Pricing Average Cost Pricing P=ATC Fair Return Price Output: 2,500 Price: $2.50 TR: (2.5x2,500) $6,250. TC: (2.5x2,500) $6,250. Per unit profit: $0.00