Overview
Pricing in natural monopolies is a critical area of study in economics, focusing on how a single firm can dominate a market due to its ability to produce at lower costs. Understanding the cost structures, pricing strategies, and the role of regulation is essential for ensuring that consumers benefit...
Key Terms
Example: Utilities like water and electricity are often natural monopolies.
Example: If producing one more unit costs $5, the marginal cost is $5.
Example: If total costs are $100 for 10 units, the average cost is $10.
Example: If a consumer is willing to pay $20 but pays $15, the consumer surplus is $5.
Example: Utilities often have their prices regulated to protect consumers.
Example: A factory producing 1,000 units may have lower costs per unit than one producing 100.