ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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computer software company
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large oil company
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local restaurant
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local cable company
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Detailed explanation-1: -profit controls-The government can regulate monopolies by limiting the amount of profit they are allowed to make. A maximum rate of profit can be set equal to what the regulator thinks a firm would earn in a competitive market.
Detailed explanation-2: -The government can reduce the deadweight loss by regulating the monopoly. Another way that governments may regulate monopolies is to tell them what price to charge. Governments may force monopolies to price their product at marginal cost (MC) or at average total cost (ATC).
Detailed explanation-3: -Correct answer is A. Example of regulated natural monopoly can be local cable TV.
Detailed explanation-4: -Control of a Physical Resource Another type of natural monopoly occurs when a company has control of a scarce physical resource. In the U.S., one historical example of this pattern occurred when the Aluminum Company of America (ALCOA) controlled most of the supply of bauxite, a key mineral used in making aluminum.