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QUESTION
What is a natural monopoly?
- What is a natural monopoly? Please explain with a graph how a regulated natural monopoly sets its price.
- Draw a graph that shows a monopoly firm making economic profit in the short run. Be sure your diagram includes the monopolist's demand, marginal revenue, average total cost, and marginal cost curves. Be sure to indicate the profit maximizing output and price. Are these profits sustainable in the long run?
