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Anonymous asked in Social ScienceEconomics · 1 decade ago

Under what conditions can a monopoly provide lower AFC, ATC and Price than a perfectly competitive firm?


2 Answers

  • Anonymous
    1 decade ago
    Favorite Answer

    Usually when the industry requires high level of fixed investment (such as railroads, power generation, water supply). Its what you call a natural monopoly - where its better for one single firm, with one single network or infrastructure. For instance, it would be better for 1 firm to install and supply water pipes to each house, rather than for 2 firms to build 2 sets of pipes to every house.

    These firms are normally in infrastructure industries. But even where a natural monopoly exists, governments normally try to break them up. Even if it is best for 1 firm to manage the pipe network, or powerlines, its possible to have several firms doing the administrative part of selling it to individual customers. Thats what happens when you change your phone provider - you still use the same piece of infrastructure (phone line) but you pay a different billing company instead.

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  • 3 years ago

    it extremely is fake. The ATC minimum (that's additionally the ATC=MC element) is merely the ultimate income if the industry is in equilibrium which would be real interior the long term yet won't be real interior the fast run. the quantity is desperate the place MR (that's rather fee in this industry)=MC. this could be at wreck even, at an financial income or an financial loss. in basic terms the wreck even is at ATC minimum.

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