What is the 'dilemma of regulation' concerning natural monopolies?
Explanation
The dilemma of regulation is that setting the price at the allocatively efficient level (P=MC) might cause the natural monopolist to incur economic losses, potentially leading to bankruptcy. Conversely, setting a price that allows the firm to cover its costs (P=ATC) does not fully correct the underallocation of resources.
Other questions
Which of the following is identified as a main characteristic of a pure monopoly?
What are factors that prohibit firms from entering an industry called?
For a pure monopolist, why is the marginal revenue from selling an additional unit of output less than the price of that unit?
A profit-maximizing monopolist will never choose a price-quantity combination in which price reductions cause total revenue to decrease because:
A pure monopolist determines its profit-maximizing output level by producing up to the point where:
According to the provided data for a pure monopolist, if the firm produces 4 units of output, the price is 132 dollars and the average total cost is 100.00 dollars. What is the total economic profit?
What is the primary reason a pure monopolist does not have a supply curve?
A common misconception about monopoly pricing is that a monopolist will charge the highest price possible. Why is this incorrect?
Compared to a purely competitive industry with the same costs, a pure monopolist will typically produce:
What does the term 'X-inefficiency' refer to in the context of monopoly?
Which of the following is a necessary condition for a firm to practice price discrimination successfully?
In the context of regulated monopoly, what is the 'socially optimal price'?
Given the provided data for a pure monopolist, what is the marginal revenue of the 6th unit of output if price is 112 dollars and total revenue is 672 dollars, while at 5 units the total revenue was 610 dollars?
Which statement best describes the efficiency outcome of a pure monopoly compared to a purely competitive market, assuming identical costs?
What is meant by 'rent-seeking behavior' in the context of monopoly?
Which of the following is an example of price discrimination?
What is the primary motivation for a monopolist to engage in price discrimination?
Based on the provided data, a monopolist finds that the marginal revenue of the 9th unit is 2 dollars and its marginal cost is 130 dollars. Should the firm produce the 9th unit?
A 'natural monopoly' occurs when:
According to the provided data for a monopolist, what is the marginal cost of the 4th unit of output if the total cost of producing 3 units is 340 dollars and the total cost of producing 4 units is 400 dollars?
What is the primary consequence of a monopolist producing an output level where P > MC?
How might technological advance, such as the development of courier delivery and e-mail, affect the market power of a monopoly like the U.S. Postal Service?
If a pure monopolist is producing 7 units of output, the price is 102 dollars, and the average total cost is 91.43 dollars. What is the firm's total economic profit or loss?
What does the term 'simultaneous consumption' mean in the context of monopoly and economies of scale?
A monopolist's demand curve is equivalent to:
If a regulated natural monopoly is forced to set a 'fair-return price', what level will the price be set at?
According to the data table, what is the profit or loss for a monopolist producing 10 units of output at a price of 72 dollars, with an average total cost of 103.00 dollars?
What is the general effect of a monopoly on income distribution?
If a monopolist's demand is weak and costs are high, such that the profit-maximizing price is below average total cost but above average variable cost, the firm should:
Which of the following describes a government policy option for dealing with a long-lasting, inefficient monopoly that was achieved through anticompetitive actions?
According to the provided data, a profit-maximizing monopolist will produce 5 units of output. What price will it charge?
What are 'network effects'?
What is the total revenue for a pure monopolist selling 3 units of output at a price of 142 dollars per unit?
In what way can patents, which grant monopoly power, be considered self-sustaining?
Why does a pure monopolist's marginal revenue become negative when it operates in the inelastic portion of its demand curve?
If a monopolist finds that its marginal revenue is 82 dollars and its marginal cost is 70 dollars at the current output level, it should:
The 'deadweight loss' or 'efficiency loss' of a monopoly is represented by the:
Which of the following conditions would prevent a firm from engaging in price discrimination?
What is the total loss for a monopolist producing at its loss-minimizing output Qm, where price is Pm, average total cost is A, and average variable cost is V?
According to Figure 10.1, if a monopolist can produce 200 units at a per-unit cost of 10 dollars, what would be the total cost if the industry consisted of four firms each producing 50 units at a per-unit cost of 20 dollars?
What is the patent length for inventions agreed upon by the world's nations?
What is the primary difference between product innovation and process innovation?
In the case of De Beers' historical control of the diamond market, what was a primary tactic used to maintain its monopoly power against independent producers?
Why might a monopolist facing the possibility of future competition keep its prices lower than the short-run profit-maximizing level?
Given the data for a pure monopolist, what is the change in total revenue (marginal revenue) when the firm moves from selling 7 units at 102 dollars to 8 units at 92 dollars?
If a monopolist is engaging in perfect price discrimination, it will charge each customer:
In the graphical model of a regulated monopoly, setting the price at the 'fair-return' level (P = ATC) results in:
What general view do economists hold regarding the technological progressiveness of a pure monopolist?
According to the data table, what is the profit-maximizing output level for the pure monopolist?