Suppose the local electrical company, a legal monopoly based on economies of scale, was split into four firms of equal size, with the idea that eliminating the monopoly would promote competitive pricing of electricity. What do you anticipate would happen to prices? Why? 2. Suppose a monopolist could charge a different price to every customer based on how much he or she were willing and able to pay (versus charging the same price to all their customers). How would this affect the monopolist's profits? Why?
1. Suppose the local electrical company, a legal
2. Suppose a monopolist could charge a different price to every customer based on how much he or she were willing and able to pay (versus charging the same price to all their customers). How would this affect the monopolist's profits? Why?
A market system that has a monopoly is one in which there is only one provider of an item or service, and that provider has total authority over the market. Because of this, the monopolist has the authority to set prices and limit output, which can result in higher prices and less economic welfare compared to a market with more competitors.
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