Question

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

a. Senator Huff
b. Senator Puff
c. both senators
d. neither senator

Answer 1

Answer: the correct answer is d. neither senator

Step-by-step explanation:

The idea of equating price with average total cost doesn't take into account the profits and I don't think companies would accept that.

The other idea is a fallacy because government-owned monopolies are often

inefficient.