Draw a pure and natural monopoly graoh and explain the difference as it applies to business...

Draw a pure and natural monopoly graoh and explain the difference as it applies to business types currently in the marketplace. Discuss an issue that currently exists with a real monopolistic business such as, Wal-Mart, oil cartels, or a utility company.

Solutions

Expert Solution

A natural monopoly arises due to high fixed cost and economies of scale (gas and water supply company, railways). Most natural monopolies are public
utilities. while a pure monopoly is due to the single seller and no close substitute of the product in the market (legal barrier to entry).

From the figure, it can be seen when 300 units are produced when more then one number firms and cost is 17 dollars while if 1000 units are produced by one firm then the cost is 8 dollars so the optimal number of the firm is one. Same is the case for pure monopoly where average cost curve is downward sloping.

The issue faces with these businesses is no such real competition in the market so high chance of customer to be exploited. Therefore, it often needs government regulation and price setting to optimal level so that consumer welfare will increase. it also distorts market forces and leads to misallocation of resources.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Natural Monopoly A. Draw a natural monopoly in an equilibrium with a profit. Clearly label the...

Natural Monopoly A. Draw a natural monopoly in an equilibrium with a profit. Clearly label the relevant areas. B. Show how this monopoly could be regulated to produce (and price) at MC, or at AC. A part of this answer should explain/show how regulation effects the demand and MR curves. C. Briefly mention the advantages/disadvantages of each (P=MC, P=AC).

Explain the concept of " natural monopoly".

1.What is a natural monopoly? Explain with a graph how a regulated natural monopoly sets its...

1.What is a natural monopoly? Explain with a graph how a regulated natural monopoly sets its price. 2.Draw a graph that shows a monopoly firm making economic profit in the short run. Be sure your diagram includes the monopolist’s demand, marginal revenue, average total cost, and marginal cost curves. Be sure to indicate the profit maximizing output and price. Are these profits sustainable in the long run?

Draw a pure monopoly market model in equilibrium. What determines the price of a product in...

Draw a pure monopoly market model in equilibrium. What determines the price of a product in this market? How does the firm choose the quantity it will produce? What happens when the monopoly is profitable? What happens when the monopoly is loosing money?

Should the government regulate the natural monopoly? Explain.

"A function of government is to regulate ""natural monopolies."" Explain what is a natural monopoly and...

"A function of government is to regulate ""natural monopolies."" Explain what is a natural monopoly and why it requires government regulation."

What is a natural monopoly? Why is government justified in regulating a natural monopoly?

Critically evaluate and explain: a. Compared to pure monopoly and pure competition, monopolistically competitive industries. b....

Critically evaluate and explain: a. Compared to pure monopoly and pure competition, monopolistically competitive industries. b. In the long run, monopolistic competition leads to a monopolistic price but not to monopolistic profits.

Chapter 10 Pure Monopoly Assignment 1. What are the major characteristics of pure monopoly? 2. In...

Chapter 10 Pure Monopoly Assignment 1. What are the major characteristics of pure monopoly? 2. In the following table are demand and cost data for a pure monopolist. Complete the table by filling in the columns for total revenue, marginal revenue, and marginal cost. Quantity Price Total revenue Marginal revenue Total cost Marginal cost 0 $34 $ XXXXXXX $ 20 XXXXXXX 1 32 $ 36 $ 2 30 46 3 28 50 4 26 54 5 24 56 6 22...

For the Pure Monopoly Market Structure 2 a. For the monopolist, please explain in detail the...

For the Pure Monopoly Market Structure 2 a. For the monopolist, please explain in detail the steps required to determine: Creative Commons Attribution 4.0 License, CC BY Charles Hackner Houston Community College unless otherwise noted. i. The firm’s optimal level of output. ii. The firm’s product price that would correspond to that optimal level of output. iii. If the firm has achieved maximum profit iv. If the firm has achieved minimum profit Use the MR MC approach along with the...

Subjects