|
Price
(dollars per thousand cubic feet)
|
Quantity demanded
(thousands of cubic feet per day)
|
|
10
|
80
|
|
30
|
60
|
|
50
|
40
|
|
70
|
20
|
|
90
|
0
|
West Coast Gas, Inc., is a natural gas supplier. The firm faces the demand schedule shown in the table above and cannot price discriminate.
The company's fixed cost is $1,000 per month and its marginal cost is constant at $10 per thousand of cubic feet.
a) Draw the demand curve faced by West Coast Gas and the marginal revenue curve. Draw the company's marginal cost and average cost curves.
b) Is West Coast Gas a natural monopoly? Why or why not?
c) What are the firm's profit-maximizing output and price?
d) What is the deadweight loss (if any). Now, the government imposes a marginal cost pricing rule on the company.
e) What is the firm's economic profit per month?