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(TCO 3) a.) What is the relationship between economies of scale and a natural monopoly? b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output? (Points : 25)

25. (TCO 3) a.) What is the relationship between economies of scale and a natural monopoly?  b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output? (Points : 25)

      
      




































26. (TCO 2) What effect should each of the following have on the demand for gasoline in a competitive market?  State what happens to demand.  Explain your reasoning in each case and relate it to a demand determinant.


(a) an increase in the number of cars

(b) the economy moves into a recession

(c) an increase in the price of car insurance, taxes, maintenance

(d) consumer expectations of substantial price increases in gasoline

(Points : 25)

      
      


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