lecture 10

lecture 10 - Discussion sections will not meet today Exams...

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1 • Discussion sections will not meet today • Exams returned in discussion section next week • Your exam will be returned in the section for which you are enrolled, not the one you indicated on your exam Chapter 14: Regulation and Antitrust Law A. Regulation of natural monopoly Natural monopoly : the producer’s average costs always decrease with increasing quantity produced Examples of natural monopolies: • electricity and natural gas distribution • urban rail system • cable television quantity $/unit average total cost marginal cost quantity $/unit average total cost marginal cost demand
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2 quantity $/unit average total cost marginal cost demand Q0 The socially efficient quantity is Q0 quantity $/unit average total cost marginal cost demand Q0 The monopolist would want to produce quantity Q1 at price P1 MR Q1 P1 deadweight social loss Regulatory strategies for natural monopoly: (1) Regulators set price equal to marginal cost quantity $/unit average total cost marginal cost demand Q0 Problem: if P = MC, firm makes loss firm’s loss Possible ways to avoid loss from P = MC
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This note was uploaded on 03/21/2009 for the course ECON 2 taught by Professor Kim during the Spring '08 term at UCSD.

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lecture 10 - Discussion sections will not meet today Exams...

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