quantity of 8 and sell at a price of 3.5, the firm will incur losses. The most likely choice is point F, where the firm is

required to produce a quantity of 6 and charge a price of 6.5.

Quantity Price Total Revenue* Marginal Revenue Total Cost Marginal Cost Average Cost

1

2

3

4

5

6

7

8

9

14.7

14.7

12.4

24.7

10.6

31.7

9.3

37.2

8.0

40.0

6.5

39.0

5.0

35.0

3.5

28.0

14.7

10.0

7.0

5.5

2.8

–1.0

–4.0

–7.0

2.0

18.0

–10.0

11.0

19.5

25.5

31.0

35.0

39.0

42.0

45.5

49.5

-

8.5

6.0

5.5

4.0

4.0

3.0

3.5

4.0

11.00

9.75

8.50

7.75

7.00

6.50

6.00

5.70

5.5

TABLE 11.3 Regulatory Choices in Dealing with Natural Monopoly (*We obtain total revenue by

multiplying price and quantity. However, we have rounded some of the price values in this table for

ease of presentation.)

The first possibility is to leave the natural monopoly alone. In this case, the monopoly will follow its normal
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