Policymakers are discussing various proposals regarding how to deal with natural monopolies.Senator Huff wants to regulate natural monopolies by equating price with average total cost.Huff contends that such a policy will ensure that monopolies make every effort to reduce costs.Senator Puff wants the government to own natural monopolies.Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies.Which senator's argument is correct?
A)Senator Huff
B)Senator Puff
C)Both Senators
D)Neither Senator

Question

Quizplus · Accepted Answer

Neither senator's argument is completely correct. Senator Huff's proposal to regulate natural monopolies by equating price with average total cost may not be effective in ensuring that monopolies reduce costs. In fact, it may lead to underinvestment and lower quality service. Similarly, Senator Puff's proposal of government ownership of natural monopolies may not necessarily result in lower costs and may lead to inefficiencies and bureaucratic hurdles. Therefore, a more nuanced and evidence-based approach is needed to deal with natural monopolies.

Policymakers Are Discussing Various Proposals Regarding How to Deal with Natural