Just need clarification on Natural Monopolies. I understand that under one, the average cost of production is variable over a range of consumer deman, but do they still produce where MC=MR and if a government tries to regulate it does it result in zero economic profit or negivite economic profit?
Without government restrictions, they’d produce where MC = MR, maximizing their profit.
If the government dictates average cost pricing (where ATC = price), then economic profits will be zero.
If the government dictates marginal cost pricing (where MC = price), then economic profits may be negative, requiring a government subsidy.