(Solved): 8. 8. Regulating a natural monopoly Consider the local cable company, which is a natural monopoly. T ...

8. Regulating a natural monopoly Consider the local cable company, which is a natural monopoly. The following graph shows the monthly demand curve for cable services, the company's marginal revenue (MR), long-run marginal cost (LRMC), and long-run average cost (LRAC) curves. PRICE AND COST ********* .... Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Pricing System Profit Maximization Marginal-Cost Pricing Fair-Return Pricing Quantity (Subscriptions) 6,000- 12,000 Short Run Price (Dollars per subscription) 35 Profit Positive Negative Long-Run Decision Stay in business Exit the industry Complete the third row of the previous table. Suppose that the government forces the monopolist to set the price equal to long-run marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to long-run average cost, also called the fair-return price. ?