a. What is the defining characteristic of a natural monopoly?
b. Should the government break up a natural monopoly into two or more firms to make the industry more competitive?
c. Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers. To achieve this goal, it requires that the natural monopoly set its price equal to marginal cost. Is this a feasible goal? Explain.
d. What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?
Question 2
The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do the short-run supply curve?
A) It moved the economy up along a stationary short-run aggregate supply curve.
B) It shifted the short-run aggregate supply curve to the left.
C) It moved the economy down along a stationary short-run aggregate supply curve.
D) It shifted the short-run aggregate supply curve to the right.
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