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Q. Explain about Natural Monopoly?
Natural Monopoly: In some industries, economies of scale are so strong that it makes most economic sense for there to be just one supplier. This kind of industry is considered a natural monopoly, because competition would eventually tend to concentrate output in one producer (and this is, in any event, most efficient way to organize production). Governments generally attempt to oversee the operation of natural monopolies through either public ownership or regulation.
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Figure 3.7 in the above textbook. Using the figure in guide, determine the approximate size of the market surplus or shortage that would exist at a glance of a) $40 b) $20
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