1. L P Power is a natural monopoly supplying electricity for a city. The firm produces the profit-maximizingquantity of electricity and earns a positive economic profit.(a) Describe a condition that distinguishes a natural monopoly from a typical monopoly.(b) Draw a correctly labeled graph for the natural monopoly market in which L P Power operates and showeach of the following.(i) The profit-maximizing quantity, labeled QM(ii) The profit-maximizing price, labeled PM(iii) The area representi
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SOLVED:A monopoly's inverse demand function is p=800-4 Q 0.2 A^0.5, where Q is its quantity, p is its price, and A is the level of advertising. Its marginal cost of production is 2, and its cost for a unit of advertising is 1 . What are the firm's profit-maximizing price, quantity, and level of advertising? (Hint: See Appendix 12E.) C
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