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1. Draw a graph of a typical natural monopoly with declining costs. a. Label monopoly price and quantity. Identify the area of deadweight loss when the monopoly chooses the profit-maximizing level of output. b. Label marginal cost price and quantity. i. How will the area of deadweight loss be impacted with marginal cost pricing? ii. What are the drawbacks to this approach? c. Label fair return price and quantity. What are the pros and cons of fair return pricing? d. W

1. Draw a graph of a typical natural monopoly with declining costs. a. Label monopoly price and quantity. Identify the area of deadweight loss when the monopoly chooses the profit-maximizing level of output. b. Label marginal cost price and quantity. i. How will the area of deadweight loss be impacted with marginal cost pricing? ii. What are the drawbacks to this approach? c. Label fair return price and quantity. What are the pros and cons of fair return pricing? d. W

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