Hi Tutor

Monopolists who vigorously seek to innovate...

1. are irrational since they are competing with themselves
2. could be profit maximizing because they expect to lower costs by innovation
3. do so out of fear for future competition or they would not innovate
4. do not exist because they have an entire market to themselves already

an then, which is the least likely outcome for a firm enjoying a monopoly in an industry that has a continually falling long-run average cost curve?

1. the state is better able to price at MC because it can use its taxing power to cover the losses that result from marginal cost pricing
2. X inefficiency is common because incentives for profits are missing
3. Bureaucrats frequently maximize the operating budgets of their departments rather than function with a profit maximization objective
4. an intelligent government will set price equal to average total cost, so that losses will not have to be borne by the taxpayer