a) If a regulator could force a natural monopoly firm to sell the socially optimal level of output at a uniform price, explain why doing so would cause the firm to lose money. b) Explain why an unregulated perfectly discriminating monopoly firm (PDM) would produce the socially optimal output.
a) If a regulator could force a natural monopoly firm to sell the socially optimal level of output at a uniform price, explain why doing so would cause the firm to lose money. b) Explain why an unregulated perfectly discriminating monopoly firm (PDM) would produce the socially optimal output.
Chapter8: Monopoly
Section: Chapter Questions
Problem 2SQP
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![a) If a regulator could force a natural monopoly firm to sell the socially optimal level of
output at a uniform price, explain why doing so would cause the firm to lose money.
b) Explain why an unregulated perfectly discriminating monopoly firm (PDM) would
produce the socially optimal output.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5f355dcb-bc5b-4e13-80f1-6e2931f12771%2Fddae8781-66ee-439a-b6aa-5d63b7171672%2Fjosxgsm_processed.png&w=3840&q=75)
Transcribed Image Text:a) If a regulator could force a natural monopoly firm to sell the socially optimal level of
output at a uniform price, explain why doing so would cause the firm to lose money.
b) Explain why an unregulated perfectly discriminating monopoly firm (PDM) would
produce the socially optimal output.
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