1. Arrows up or down: At a natural monopolist’s current level of output, marginal cost exceeds marginal revenue. The firm should                   its output and its price                      . 2....

1. Arrows up or down: At a natural monopolist’s current level of output, marginal cost exceeds marginal revenue. The firm should
its output and its price
.

2. The entry of a second firm shifts the demand curve of the original firm to the , so that at each price the original firm will sell a(n) quantity.

3. A natural monopoly occurs when the long-run cost curve lies entirely
 (above/below) the demand curve of the typical firm in a two-firm market.

4. Under an average-cost pricing policy, the maximum price is shown by the intersection of the

 curve and the
 curve
 .

5. When the British switched from private water supply to public supply, the quality of water, consumption per capita
 , and capital cost per unit of output
 . (Related to Application 1 on page 630.)

6. Sirius XM Radio became profitable—just barely—with about
subscribers. (Related to Application 2 on page 631.)