City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. Quantity (Millions of therms) Price ($ per therm) Total Cost (million $) 1 48 35 2 44 64 3 38 90 4 30 113 5 20 133 6 8 150 If the government decides to regulate this natural monopoly by forcing them to produce at the point where the demand curve intersects average cost, then compared to the unregulated natural monopoly, the price will __ and the quantity will _. Group of answer choices fall, rise rise, fall fall, fall rise, rise

City Gas is a natural monopoly that supplies natural gas to a particular city. It's cost and demand information are given below. Quantity (Millions of therms) Price ($ per therm) Total Cost (million $) 1 48 35 2 44 64 3 38 90 4 30 113 5 20 133 6 8 150 If the government decides to regulate this natural monopoly by forcing them to produce at the point where the demand curve intersects average cost, then compared to the unregulated natural monopoly, the price will _____fall_______ and the quantity will _____rise______.

anthougo anthougo · Answer 2 · 2021-12-02T21:52:12+01:00

The regulated natural monopoly would produce at the price that will fall to $30 per therm, and the quantity will fall to 4 million therms at an average cost of $28.25.

Data and Calculations:

Quantity Price Total Cost Average Marginal

(Millions of therms) ($ per therm) (million $) Cost Cost

1 48 35 35 35

2 44 64 32 29

3 38 90 30 34

4 30 113 28.25 23

5 20 133 26.60 20

6 8 150 25 17

Thus, City Gas will be forced to supply at the quantity where the price will fall, and the quantity will fall.

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