This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: o MC 21 P > MC Less output than socially optimal. $ Q D = MWTP P* P o Q* MR Q o Deadweight loss MC 3 22 Natural Monopoly: Cost of meeting demand is lower with one firm than with more than one firm. 24 $ Q AC D IRTS: A given % increase in all inputs raises output by more than that %. 25 $ Q AC D IRTS Average costs fall. AC = TC Q 27 Policy Conclusions When there is a natural monopoly: allow monopoly but regulate it to prevent it from monopolistic pricing. When there is not a natural monopoly: prevent the growth of monopolies and the exercise of monopoly power....
View Full Document