ch13_monopolies

11 15 20 passengers thousands per year monopolies are

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: onomic profits indefinitely • Being both productively and allocatively inefficient • Producing less and charging more • Creating an unequal distribution of income and wealth Monopoly Benefits Monopoly • Economies of scale – Increase in output brings a decrease in average cost • Economies of scope – increase in the range of goods produced decreases average total cost. • Incentives to innovation Regulating a Natural Monopoly Monopoly • • • • Tax Marginal cost pricing Average cost pricing Regulation Price and cost (dollars per hour) Taxing a Monoploy MC 20 ATCtax 14 10 ATC Economic Economic Tax Revenue profit $12 D MR 0 1 2 3 4 5 Quantity (haircuts per hour) Price and cost (cents per cubic metre) Regulating a Natural Monopoly Monopoly 100 Profit maximizing 80 Average cost pricing 60 ATC MR 10 0 1 2 Marginal cost pricing MC 3 4 Quantity (millions of cubic metres per day) (millions Regulating a Monopoly Regulating • Agency • Public ownership • Laws to restrict monopolistic behavior...
View Full Document

Ask a homework question - tutors are online