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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

It is usually asserted that public utilities such as electric companies and gas companies are natural monopolies, but an assertion is not proof. How would you go about trying to prove (or disprove) that electric companies and the like are (or are not) natural monopolies? (Hint: Consider comparing the average total cost of a public utility that serves many customers with the average total cost of a public utility that serves relatively few customers.)

To determine

Explain the electric companies that have the nature of monopolies.

Explanation

To conduct an experiment regarding the nature of the firm is like how many enter into the market, how many exist, how many consumers consume their products, and which are costly and long-term processes. Therefore, in order to prove the electric companies and gas companies are natural monopolies by comparing the de...

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