Question

explain how natural monopolies and regulated monopolies are priced and the inefficiencies that are created

Answer 1

A natural monopoly occurs where the average cost of production falls over the wide range of output. Monopoly produces where MR = MC and it does not produce where P = MC. Hence, it is not considered an efficient level of output.

Thus, deadweight loss is created in a monopoly set up. There must be a right restriction on the activities of a firm. or monopoly firm must be made to produce where P = MC. it would be an efficient level of output.

Natural monopoly would not produce an efficient level of output if it is not regulated. A regulated monopoly would produce an efficient level of output.