Does the monopolist have an incentive to reduce cost under average cost pricing? How can this be overcome?
Under average cost pricing, the monopolist has no incentive to reduce costs. Regulators have tackled this problem by allowing the regulated firm to keep some of the profits that come from lower costs. In other words, they do not adhere strictly to average cost pricing.
You might also like to view...
During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ________ and the equilibrium quantity ________.
A) increased; increased B) increased; decreased C) increased; did not change D) decreased; did not change E) did not change; increased
Based on the table "Real and Nominal GDP," if year one is the base year, then the inflation rate in year three is ________
A) 14.6% B) 9.5% C) 9.9% D) 11.5% E) 16.5%