lectureAssignment15 - ECONOMICS 100 Lecture Assignment #15...

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ECONOMICS 100 Lecture Assignment #15 (Natural Monopoly) Source: LR11, Chapter 12, pages 296-301; LR10, Chapter 12, pages 288-292. 1. Natural Monopoly What is a "natural monopoly"? What distinguishes it from other forms of monopoly? 2. Inherent Problems in Regulating a Natural Monopoly The demand and cost conditions for the Cosmodemonic Telephone Company, a monopoly, are as follows: D Schedule: Traditional market demand schedule that is negatively sloped Cost Conditions: The Average Cost Schedule falls throughout the relevant range. In other words, when AC cuts D, it is still falling. Put another way, the minimum point of AC occurs to the right of the D schedule. Your first task: Draw a diagram that conforms to the above situation. Now answer these questions: 2.1 The government of the province of Boontario, in which this monopoly is located, decides that the firm is charging too high a price when it maximizes profit. The province therefore sets a ceiling price for the monopoly, choosing that price
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This note was uploaded on 08/24/2010 for the course ECO 100 taught by Professor Indart during the Fall '08 term at University of Toronto- Toronto.

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lectureAssignment15 - ECONOMICS 100 Lecture Assignment #15...

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