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Regulations Natural Monopolies

The following graph represents a natural monopoly.

2488_Regulations Natural Monopolies.jpg

Required:

problem 1: Why this firm considered the natural monopoly?

problem 2: If the firm is unfettered, what output and price would maximize its profit?  What would be its profit or loss?

problem 3: If the regulatory commission establishes the price with the goal of accomplishing allocative efficiency, what would be the output and price? What would be the firm’s profit or loss?

problem 4: If a regulatory commission establishes the price with the goal of allowing firm a “fair return,” what would be the output and price? What would be the firm’s profit or loss?

problem 5: Which one of prices in parts b, c, and d maximizes consumer surplus? What problem, if any, takes place at the price?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M910506

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