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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?

To determine

Reasons of having one city bus company as a subsidized and regulated monopoly instead of many in the past.

Explanation

Whenever there are multiple firms in an industry, then there must be single firm whose output will be more, and cost is less which results in profits for that firm. The firm will be emerged as natural monopoly and nobody can match their prices and automatically exit from the industry.

In U.S., city bus service is one of the utility providers where infrastructure must be maintained...

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