Answer to Question #83770 in Macroeconomics for Ashish Kamble

Question #83770
A certain town in a state obtains all of its electricity from one company, South Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. Do you agree with the CEO’s argument? Give reasons. What are the social costs of monopoly power? What are the measures do you suggest to control monopoly power?
1
Expert's answer
2018-12-14T14:11:11-0500

I don't agree with the CEO’s argument, because in case of the monopolistic market the deadweight loss is created and all the citizens loss some part of the potential gain. The social costs of monopoly power are higher than social benefits. The measures we can suggest to control monopoly power are government regulation, antitrust laws, increase of competition, decrease of barriers to entry etc.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS