Answer:
An electric company in a city is considered to be a natural monopoly because the average cost of it reduces as it increases the production of its services. New electric companies find it difficult to compete against the existing company because of the decreasing average cost.
If two electric companies are established, then the monopoly power of an existing company will vanish accordingly.
A change in technology tends to reduce the cost of production. Reduction in the cost of production is likely to eliminate the natural monopoly since other firms will enter in the market.
Answer:
If firm X is able to maximize its profit by cutting its price, then the action would be considered as legitimate. Production efficiency allows firm X to reduce its price. If firm Y is not able to compete with the price determined by firm X, then it has go out of the business. Reduction in the price by firm X drives the firm Y out of the business.
Therefore, considering the benefits to consumers one would consider the price cut as a legitimate act.
If the price is raised by firm X after the exit of firm Y, then it would be regarded as an anticompetitive act.
Answer:
Automobiles and aircraft industries are highly concentrated because of their higher fixed costs. Higher fixed cost leads to establish large economies of scale. Establishment of large economies scale tends to create monopoly in the market.
Computer and electronic production, pharmaceuticals, and jewelry industries are not concentrated because these industries do not have economies of scale. Entry of new firms in these industries is not difficult.