Nevertheless, we can identify some exceptions to this general rule. Of course, you can use oil, natural gas, or kerosene for lighting too—but these are hardly convenient options. Some industries are natural monopolies – due to high economies of scale, the most efficient number of firms is one. Since natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would a. cause the monopolist to operate at a loss. If antitrust regulators split this company exactly in half, then each half would produce at point B, with average costs of 9.75 and output of 2. C) marginal cost pricing, with subsidies from the … As we have seen, natural monopolists enjoy an economic cost advantage due to economies of scale. This monopoly will produce at point A, with a quantity of 4 and a price of 9.3. This tends to lead to calls from consumers for government regulation, while at the same time opening up opportunities for competitors to offer better service. 28. Overall, monopolies appear to be economically inefficient. D)regulators try to please everybody. 1. How the government regulate monopolies. B)government actions promoting the economic growth of key industries or firms. One example is when a natural monopoly exists. The concept of cross elasticity of demand can be used to measure the presence of close substitutes for the product of a monopoly firm. The theory of regulatory behavior that suggests that regulators must consider the demands of legislators, consumers, and members of the regulated agency is called. a pure monopoly in that regard, even though you can switch to oil or natural gas for heating. Answer:C. 51)Industrial policy comprises: A)industrial regulation and social regulation only. When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly D) All of the above are correct. 33. Regulators usually encourage natural monopolists to engage in A) marginal cost pricing. The regulators might require the firm to produce where marginal cost crosses the market demand curve at point C. c. maximize producer surplus. Therefore, we cannot encourage competition, and it is essential to regulate the firm to prevent the abuse of monopoly power. people do not usually behave in a non cooperative fashion even when it is in their immediate interest to do so because. Natural Monopoly and Price Discriminating Monopoly. 27. d. result in higher profits for the monopoly. b. result in a less than optimal total surplus. C) share-the-gains, share-the-pains theory. Price capping by regulators RPI-X ... if regulators disallow price increases requested by a natural monopoly that is currently earning an economic loss, quality or service will ... regulators usually encourage natural monopolists to engage in. Natural Monopolies. 26. B) the capture theory. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly and duopoly which consists of a few sellers dominating a market. Question 11 options: A) the natural theory. If the government regulates the price that a natural monopolist can charge to be equal to the firm’s average total cost, the firm will A) earn zero profits. A monopoly (from Greek μόνος, mónos, 'single, alone' and πωλεῖν, pōleîn, 'to sell') exists when a specific person or enterprise is the only supplier of a particular commodity. C)anti-combines, industrial regulation, and social regulation. B) average cost pricing. 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