Question
In many countries, the government chooses to internalize the monopoly by owning monopoly providers of goods and services. Monopoly is one of the market structures
In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. Monopoly is one of the market structures in Malaysia. It is characterized by the ability of one seller to gain high profits. In a place where a monopoly operates, it is hard for other firms to start. An example of monopolies Malaysia GLCs are Telekom Malaysia, TNB and etc. (In some cases, these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets).
(a) Explain TWO (2) advantages and disadvantages of such an approach above to ensure that the "best interest of society" is promoted in these monopoly markets. (8 marks)
(b) Economists however would prefer a private ownership of monopoly rather than a public ownership of monopoly. Explain the above statement using the economic concept of a monopoly market. (8 marks)
(c) One solution to the problems of marginal-cost pricing of a regulated natural monopolist is average cost pricing. In this model, the monopolist is allowed to price its production at average total cost. Differentiate between an average-cost pricing and marginal-cost pricing. (4 marks)
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