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Unformatted text preview: can appoint a commission to reg"ulate a monopoly and limit renrrns. Natural Monopoly Regulation r AJthough there have a number of experiments with various options world wide, the most widely used methods are rate of retm and price caps. r In principle, one would like a regulator to establish a price thatmaximizes social welfare, i.e. . p:MC, but this is'gpically not feasible because it results in losses. . Average total cost must be incorporated into regulation price, olherwise, a monopolist will exit the market in-the longierm if it is not eaming profits. I Either the regulated price rnust be above ATC or else the lower price must be subsidized by the govemment. '/t...
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This note was uploaded on 12/29/2011 for the course ECON 6 taught by Professor Dianne during the Fall '10 term at Simon Fraser.
- Fall '10