03.06 Inefficiency of the Monopoly

03.06 Inefficiency of the Monopoly - set/equal to ATC=D,...

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03.06 Inefficiency of the Monopoly 1. The toilet bowl market for Ralph and Ed will be a monopoly market. The reason is because Ralph and Ed are the only store that sells toilet bowls in northern Maine. Therefore, they have become the toilet bowl industry in Northern Maine. The Marginal Revenue curve (MR) will be below the demand curve.
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2. The New Federal law will cause Ralph and Ed’s toilet bowl industry price to be
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Unformatted text preview: set/equal to ATC=D, instead of where MC=MR intersects the demand curve. This is called the Fair rate of return. However, if the government where to subsidize the toilet bowl industry, then the price of toilet bowls would be set to where MC=D. Either way, government regulation will reduce the monopoly price and increase the output....
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03.06 Inefficiency of the Monopoly - set/equal to ATC=D,...

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