You are the mayor of your home town, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage-collection monopoly by awarding only one company a permit to collect garbage in
your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial increasing economies of scale to garbage collection. What are your options if you are interested in efficiency?
Since there are substantial increasing economies of scale, you would not want to allow more companies to
enter and you would not want to split up the existing company. You can either regulate the monopoly, or
put the city in charge of garbage collection (either by buying out the monopoly, or by revoking its permit
and taking over garbage collection).
You might also like to view...
The fastest growing nations today are those with
A) few funds spent on research and development. B) government intervention in markets to ensure high prices. C) the least saving. D) the fastest growing exports and imports. E) barriers that significantly limit international trade.
Long-run aggregate supply shocks are a source of business cycle fluctuations in ________
A) traditional Keynesian and new Keynesian theory B) new Keynesian and real business cycle theory C) real business cycle and traditional Keynesian theory D) traditional Keynesian, new Keynesian and real business cycle theory