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There are three types of government regulations used to alter or control firm behavior. Social regulation aimed at improving health and safety. Economic regulation of a natural monopoly and antitrust policy used to prevent a monopoly and foster competition. A. Antitrust policy b. Social regulation c. Economic Regulation d. Social regulation 10. (Regulating Natural Monopolies) The following graph represents a natural monopoly. A. Why is this firm considered a natural monopoly? B. Fifth firm is unregulated, what price and output would maximize its profit? What would be its profit or loss? . If a regulatory commission establishes a price with the goal of achieving allocation efficiency, what would be the price and output? What would be the firm’s profit or loss? D. If a regulatory commission establishes a price with the goal of allowing the firm a “fair return,” what would be the price and output? What would be the e. Which one of the prices in parts b, c, and d maximizes consumer surplus? What problem, if any, occurs at this price? A. ) It is considered a natural monopoly due to the long-run average cost curve hat slopes downward over the range of market demand. B. The profit is maximized at point I where the log range average cost intersects with demand. The profit would be the area of b:e and I:] c. ) The price is h and the output is z and intersects at n where the long range marginal cost intersects with demand. The loss would be represented by the area of h:g and m:n. D. ) The price is f and the output is y and intersects at I where the long range average cost intersects with demand. The profit would be represented by the area of e. ) Consumer surplus is maximized at point n which is the intersection of the long range marginal cost and demand.
It is at this point that the monopoly would operate at a loss and would have to be subsidized to continue operating. Chapter 16 1 (Private and Public Goods) Distinguish among private goods, natural monopolies, open-access goods, and public goods. Provide examples of each. Private goods are rival in consumption which means once consumed by one party it is unavailable to any other party. Suppliers of private goods can exclude those who don’t pay. A natural monopoly is one that the lowest cost s achieved when on firms serves the entire market.
An open-access good is rival in consumption but non-payers cannot be excluded easily (Impeacher, 2009). Public goods are non-rival in consumption which means that one party’s consumption does not diminish the amount available to others. Examples Private goods: pizza. Natural monopoly: subway system. Open-access good: ocean fish. Public good: national weather service. Chapter 17 12. (External Costs) Use the data in the table to the right to answer the following questions. A. What is the external cost per unit of production? B.