Micro Econ help?

Y

yourthemannowdog

Active member
I suck at economics. If someone could guide me through these two problems i will give them karma and photoshop their face onto anything. ANYTHING

first question is:

What is the problem with marginal cost pricing in the natural monopoly situation? How do regulatory agencies in the United States usually handle the problem?

Second one is:

Can a firm make losses by producing the rate of output at which marginal revenue equals marginal cost? Why?
 
Well in monopolies your marginal cost to the company will be low. But the marginal cost to the customer is going to be really high since in a monopoly situation with no competitors, they can set the price and costs of anything they want :)
 
i'll hafta check my book but i want to say yes, depending upon demand.

even if marginal revenue is equal to marginal cost, a firm could, in theory produce too much, and thus have excess supply above the quantity demanded by the market. In that case the excess supply could be considered a "loss".
 
There also maybe some where in the value chain of the business that is producing extra cost.

But what techno said, Too much inventory is a bad thing depending on the business. And you can generate bad debts or losses with too much inventory.
 
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