Pricing with Zero Marginal Cost. Consider a natural spring that produces water with a unique taste. The monopolist who owns the spring has a fixed cost of installing plumbing to tap the water but no...

Pricing with Zero Marginal Cost. Consider a natural spring that produces water with a unique taste. The monopolist who owns the spring has a fixed cost of installing plumbing to tap the water but no marginal cost. The demand curve for the spring water is linear. Draw a graph to show the monopolist’s choice of a price and quantity. At the profit-maximizing quantity, what is the price elasticity of demand? If the spring were owned by a government that applied the marginal principle, what price would it charge?