Question

Consider panel (b) of Figure 27-2. The quantity Q1 is $2,000$units, the price P1 is $\backslash (2$per unit, the average cost AC1 is $\backslash )4$per unit, and the vertical distance to point C is $\$6$per unit. What is the dollar amount of the losses earned by this natural monopolist when its price is equal to its marginal cost of producing Q1 units?

Short answer

the dollar amount of the losses earned by this natural monopolist is$\$4000$

Step-by-step solution

Given Information

Natural Monopoly alludes to a market where there should exist just a single dealer. In certain business sectors, a solitary dealer is expected for proficient creation since that one firm can deliver the complete result at a lower cost than a few firms could.

Explanation

Assuming the long-run normal expense bend of the restraining infrastructure is constantly falling over the whole scope of market interest, then, at that point, it demonstrates that only one firm can serve the market.

We know,

Quantity $Q_1=2000units$

Price$P_1=\$2$per unit

Average cost $A{C}_1=\$4$per unit

The total revenue = $\$4000$and the total cost = $\$8000$

Hence the loss is=$\$4000-\$8000=-\$4000$