Page 665 - Krugmans Economics for AP Text Book_Neat

2. Draw a correctly labeled graph of a natural monopoly. Use
1 point: The axes are correctly labeled.
your graph to identify each of the following:
1 point: The demand curve is labeled and sloped downward. a. consumer surplus if the market were somehow able to
operate as a perfectly competitive market
1 point: The marginal revenue curve is labeled, sloped downward, and below
b. consumer surplus with the monopoly
the demand curve.
c. monopoly profit
1 point: The average total cost curve is labeled and downward sloping (not d. deadweight loss with the monopoly
U-shaped!).
1 point: The marginal cost curve is labeled and below the average total cost
curve.
1 point: The profit-maximizing output, Q M , is shown on the horizontal axis
where MC = MR. Section 11 Market Structures: Perfect Competition and Monopoly
1 point: The profit-maximizing price is found on the demand curve above the
point where MC = MR.

1 point: The monopoly profit area is correctly shaded and identified.
1 point: The regulated price is labeled on the vertical axis to the left of the point
where the demand curve crosses the average total cost curve.

module 62 Monopoly and Public Policy 623