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Assume that the widget industry is a natural monopoly. Show on a graph the total surplus in the absence of government regulation, assuming the industry
Assume that the widget industry is a natural monopoly. Show on a graph the total surplus in the absence of government regulation, assuming the industry does in fact exist. Show also total surplus under rate-of-return regulation (a policy that leads to average cost pricing) and under two-tier pricing. Assume that the regulator has complete information about costs when determining the maximum consumer price under rate-of-return pricing
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