question archive Monopoly is inefficiency because it creates deadweight loss
Monopoly is inefficiency because it creates deadweight loss
Subject:EconomicsPrice: Bought3
Monopoly is inefficiency because it creates deadweight loss. Economists propose ways to correct the inefficiencies raised by a monopoly. There are two policies to fix the inefficiency problem: Average-Cost Pricing method and Marginal-Cost Pricing method. Average-Cost Pricing regulates the monopoly firm should set the price to its average cost (P-ATC) while Marginal-Cost Pricing regulates the monopoly firm should set price to its marginal cost (P-MC). (a) What are the benefits of the Average-Cost Pricing method? What are the shortcomings of it? (6 points) (b) What are the benefits of the Marginal-Cost Pricing method? What are the shortcomings of it? (6 points) (c) Since the Average-Cost Pricing and Marginal-Cost Pricing method are government public policies, the economists always think about the private ways to solve the problem. Please state and explain ONE private method to fix the inefficiency problem created by monopolies (5 points)
