Question

One way that has been suggested to eliminate deadweight loss from monopoly power without reducing incentives to innovation is to:_________

Answer 1

One way to eliminate deadweight loss from monopoly power without reducing incentives to innovation is through government regulation, specifically by designing a system of price cap regulation with flexibility and incentive.

Step-by-step explanation:

In order to eliminate deadweight loss from monopoly power without reducing incentives to innovation, one way that has been suggested is through government regulation. With natural monopoly, market competition is unlikely to take root, so government regulation can help prevent high prices and restricted output. Designing a system of price cap regulation with flexibility and incentive can be an effective approach to achieve this.