Instead of pursuing profit maximization through marginal cost pricing, the reg- ulated natural monopolists are required to follow the average cost pricing. In the average cost pricing, a natural monopolist firm sets its price at the level where the demand curve intersects the average cost ATC curve. This policy, compared to marginal cost pricing, leads to production of a larger volume of output at a relatively lower price.
What is the level of output and price if a natural monopolist with the cost function TC = 0.3Q3- 8Q2+ 120Q and market demand function
P = 100 - Q follows the average cost pricing? (From 2 possible solutions choose the larger one.) Compare this solution to the profit maximizing solution.