Chapter 13 Natural Monopoly

government intervention to alter market structure or prevent abuse of market power. This alters an entire market
government intervention to alter the behavior of firms- for example, in pricing, output, or advertising. This alters certain firms
natural monopoly
an industry in which one firm can achieve economies of scale over the entire range of market supply
One firm can provide the good or service at a ____ cost than several competing firms
this type of firm has a _____ ____ ATC Curve
high fixed costs
This firm would also have ____ ____ ___ that is a large capital input and low marginal costs
An unregulated natural monopoly produces output where profit hits demand and charges at that price so that equals ___ _____
p= MC
Efficiency calls for marginal cost prices ____ ____
p= ATC
Zero economic profits occur at the point where ___ _____
price regulation
the monopoly will not be allowed to charge its profit maximizing price
economies of scale
Economic profits lure in new firms, but only one can achieve _____ of _____
efficient, loss
P= MC price equals to opportunity cost. _____ but generates a _____ to the firm p< ATC
ATC - p
To get the firm to produce, it must be provided a subsidy that equals the loss ____ ____
p = min ATC
The ATC curve slopes downward; by increasing output we lower costs more.
loss, subsidy
Again the firm operates at a ___ and would need a ____.
profit regulation
requires the firm to produce certain output and charge certain price
this is zero economic profits; no subsidy is needed and allows a normal profit
rate; approved
--- increase requests must be ____ by a competent board
output regulation
since only one firm is allowed, it must serve all customers
reduced quality
By doing an output regulation there is a risk of ___ ____ if the firm cuts costs to increase profits
marginal cost; subsidy
Government regulations well the options are conflicting; ideally we want ___ ____ pricing no _____, full service, and quality service
imperfect; flawless
the choice society has is not between ______ markets and _____ government intervention
government failure
government intervention that fails to improve economic conditions.
worse; regulated
market outcomes after regulations may be ____ than before the industry was _____
compliance costs
Regulated firms have huge ____ ____
undesired; cost
Government failures alters the mix of output in ____ ways, causing a ____ to society
benefits; costs; rejected
If anticipated added ____ do not exceed added _____ then the added regulation should be _____
balance; cost
Regulatory intervention must ___ the anticipated improvements in market outcomes against the economic ____ of regulation
less; regulation
the regulated industry is ____ productive than desired due to ____
Advance ____ destroys the reasons for regulation
natural monopoly
Many times, a regulated industry no longer is a _____ _____ as substitutes of its good or service become available
____ an industry grants more firms more freedom to compete in the widened market