Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 5

Does economic theory indicate that an ideal regulatory agency that forces a monopolist to charge a price equal to either marginal or average total cost will improve economic efficiency? Explain. Does economic theory suggest that a regulatory agency will in fact regulate in a manner consistent with economic efficiency? What are some of the factors that complicate the regulatory function?