Of course, what exactly is the fair return on capital ha been a subject of severe controversy and governments which regulate monopoly often appoint committees to decide about the fair return on capital investment which then become a part of the cost of production. Essay on monopoly 2025 words 9 pages monopoly monopoly and fair return 945 words | 4 pages chapter 10 (tentative due date: by november 1) question 2: discuss . Socially optimal and fair return for monopolies how do you regulate a monopoly, and how would this be depicted on a graph watch a savvy economics instructor answer this question by offering detailed explanations and drawing a graph in real time.
Answer to with a natural monopoly, the fair return price: answer is allocatively efficient the socially optimal price is allocat. Before, for an unregulated monopoly, quantity was derived from where mc equaled mr, but now for a fair-return price monopoly, quantity is determined by where price, also known as the demand curve, equals atc. Does a fair return price mean the monopoly company will now produce at the quantity level where price = average total cost - 732295. Micro 45 socially optimal and fair return for monopolies to get them to produce the allocatively efficient output or they can get them to produce at fair return (d=atc) where they make no .
Comparing results given by socially optimal price (mc=p) and fair-return price (p=atc) sometimes and dilemma, called dilemma of regulation arises when the price is set to achieve allocative efficiency ( p=mc) regulated monopoly is more likely to suffer losses. Fair return price fair return price is the third option of price for monopolies instead of p=mc or mr=mc then up to demand, in a fair return price, p=atc. Since the monopoly is the only producer, government could subsidize the monopoly for these losses such that they earn a normal return, but this is often politically difficult fair return or average cost pricing. Monopoly and fair return chapter 10 (tentative due date: by november 1) question 2: discuss the major barriers to entry into an industry monopoly the focus .
On the contrary, it is designed to protect consumers from monopoly prices (pierce, 1984, rose, 1996) 21 myers (1972) explains ideal regulation forces utilities to operate at competitive levels of investment, price, output and profit with prices set so utilities earn a ‘fair return’ on investment utilities, reliant on the regulatory . A single-price monopoly - that is, it charges the same price to all of its customers (no price discrimination) while the higher fair-return price does not produce . A regulated natural monopolist that is allowed to earn a “fair and reasonable” rate of return has no incentive to keep costs down, because reducing costs won’t allow them to earn higher profits as a result. 1 answer to in view of the problems involved in regulating natural monopolies, compare socially optimal (marginal-cost) pricing and fair-return pricing by referring again to figure 109. A monopoly form of market is highly undesirable for our society because of the sizable loss of productive and allocative one method is the fair-return pricing .
We will write a custom essay sample on monopoly and market entry specifically for you for only $1638 $139/page monopoly and fair return what is a monopoly . If he makes and sells 420 units at $5 each, he earns no monopoly profit—just a fair return on the capital invested in the business thus, the monopolist is $400 richer because of his monopoly position at the $7 price. If the government regulated the monopoly and made the firm set a fair-return price, what price and quantity levels would we observe in the short run p3 and q2 the problem with socially-optimal pricing regulation of a natural monopoly is that:.
A legal monopoly is a market in which competition and entry are restricted by the granting of a public franchise, license, patent or copyright, or in which a firm has acquired ownership of a significant portion of a key resource. Explain why government may choose to regulate instead of breaking up a natural monopoly, then define and explain the socially-optimal price and the fair-return price because sometimes monopoly is good and it is not always bad 9. Rate of return regulation is a form of price setting regulation where governments determine the fair price which is allowed to be charged by a monopoly. Answer to distinguish between the monopoly price, the socially optimal price, and the fair-return price of a government-regulated .
Monopoly industry with natural monopoly with fair-return and socially-optimum regulation ap microeconomics review page 2 sat, 15 sep 2018 21:28:00 gmt ap. Ap microeconomics review page 1 natural monopoly with fair-return and socially-optimum regulation fair-return vs socially-optimum return (which one might . A natural or artificial monopoly can lead to increasing the fair return providing the owner of the company or the production organisation with a high profit.