Final answer:
In an unregulated state, a natural monopoly would meet demand at a price of 9.3 by producing at a quantity of 4, maximizing its economic profit due to economies of scale. This price is determined by the point where marginal revenue equals marginal costs. Regulatory interventions could potentially require different production quantities and pricing strategies.
Step-by-step explanation:
A natural monopoly meets demand at a price where marginal revenue (MR) equals marginal costs (MC), leading the firm to maximize its profits. In the scenario provided, the natural monopoly would produce at a quantity of 4 and charge a price of 9.3. This is identified by the intersection point P (MR=MC), guiding the firm to point A on the demand curve. Since the set price exceeds the average cost, the monopoly is able to make economic profits. This pricing strategy is typical for a natural monopoly when left unregulated, as it balances out the economies of scale and the need to cover large fixed costs characteristic of such markets.
If the monopolist were compelled by regulators, other production and pricing points may be chosen, such as point F, commanding a production level of 6 and a relative price reduction to 6.5. This often reflects a balance between affordability for consumers and the sustainability of the monopoly. The existence of a natural monopoly in this case is supported by the fact that average costs decline over the output range satisfying market demand, indicating economies of scale and justifying a single supplier for the market's needs.