Use the information below to answer the following questions. Fact 12.5.1 ...

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Use the information below to answer the following questions.

Fact 12.5.1

Cascade Springs Inc. is a natural monopoly that bottles water from a spring high in the Rocky Mountains. The total fixed cost it incurs is $80,000, and its marginal cost is 10 cents a bottle. The demand curve for Cascade Springs bottled water is shown in the following figure:

Figure 12.5.1

Refer to Figure 12.5.1. Suppose the government regulates the firm with average cost pricing. The price of a bottle of water is

$0.20.

✅

$0.

❌

$0.30.

❌

$0.10.

❌

$0.50.

❌

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