JustMeInc. is the only provider of high speed internet in Tinytown. The firm charges their customers on an annual basis. Its cost and demand information are given below. Quantity (Millions of subscribers) Price ($ per subscriber) Total Cost (million $) 1 300 200 2 260 380 3 233.33 540 4 210 680 5 180 800 6 150 900 7 100 980 8 60 1040 If the government decides to regulate this natural monopoly by forcing them to sell the quantity and price where the market demand curve crosses average cost, then the market price would be

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Answer:

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Explanation:

Now if demand curve is equal to average cost curve then from the table and graph we can see that it happens when quantity is 6 million and price is 150.

In an unregulated market, company will sell to maximize profit which as seen from the table happens when quantity is 4 million and price is 210.

Allocative efficiency means price(demand) = MC which from the table can be seen at price 60 and quantity 8 million output. but at this price we see that company suffers 560 million loss so it should get 560 mullion as subsidy to even work at zero profits.

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