which is the correct answer and why? thank you :) 4. When a firm\'s average cost
ID: 1116484 • Letter: W
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which is the correct answer and why? thank you :)
4. When a firm's average costs decrease over their entire range of relevant output, it is socially efficient to have one firm supply to the entire market as opposed to multiple firms each producing a smaller amount. Suppose firms in a market produce a homogeneous good and have high fixed costs of production and low, stable marginal costs. In which of the following cases do consumers not benefit from a natural monopoly serving the entire market? a) When the monopolist is regulated to price at average cost. b) When the monopolist is regulated using marginal cost-plus pricing. c) When the monopolist is unregulated. d) When the monopolist is regulated to make zero economic profit.Explanation / Answer
Answer : When the monopolist is unregulated than the consumer are not benefited because in this case monopoly charges higher price for the product and attained whole consumer surplus for there own useage. In this case they sell the quantity where MR=MC and charged maximum price from the consumer.
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