Until the 1980s, AT&T held a monopoly over thenational market for phone services. Suppose thatAT&T argued that it was a natural monopoly,because the fixed cost of creating a nationwidephone network generated huge economies ofscale, and that there was therefore no welfareloss associated with its monopoly. Counter thisargument by explaining how even a naturalmonopoly causes deadweight loss

Principles of Economics 2e
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Chapter9: Monopoly
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Problem 3SCQ: Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into...
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Until the 1980s, AT&T held a monopoly over the
national market for phone services. Suppose that
AT&T argued that it was a natural monopoly,
because the fixed cost of creating a nationwide
phone network generated huge economies of
scale, and that there was therefore no welfare
loss associated with its monopoly. Counter this
argument by explaining how even a natural
monopoly causes deadweight loss

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