Microeconomics Please Help!?
Suppose that Avalin is a pure monopoly in the market for cellular services. Avalin is able to provide cellular phone service to a large portion of the economy while providing for each additional subscriber at a very low marginal cost.
8.1. Avalin’s cost structure implies
A. Economies of scale
B. A lack of technological advances
C. X-inefficiency
D. Rent-seeking expenditures
The U.S. Postal Service has been a pure monopoly with a legal patent for many years. Its sorting, routing, and delivering methods have been the same ever since it received the patent from the U.S. government.
This is an example of _________________.
A. X-inefficiency
B. Lack of technological advances
C. Economies of scale
D. Rent-seeking expenditures
Tagged with: avalin • cellular phone service • cellular services • economies of scale • economy • expenditures • inefficiency • large portion • marginal cost • monopoly • patent • s postal service • subscriber • technological advances • u s postal service
Filed under: Postal Scale
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The answer for 8.1, according to me should be A. In a monopoly, the producer has the choic of exploiting customers because there is no close substitute. So in all probability, the Firm is already charging a significantly large price. It means that the firm charges a lot of profit and at the same time, it has many customers. So it is basically that the firm enjoys economies of scale.
The answer to the second question should be B. The postal service has not made any progress in the field of technology so it is still lagging behind.
It is confusing because the answer can also be A. But here it does not fit the bill because it cannot be implied that there is inefficiency since has the postals been inefficient, it should have led a decline in the number of sorted mails and other related problems cased due to inefficiency.
Veru Challenging questions indeed! Do let me know if I was right!