Assignment Details: You Have Learned That Some Market 955542

Assignment Detailsyou Have Learned That Some Markets Are Competitive

Assignment Details: You have learned that some markets are competitive but that there are also a few markets that are serviced by just one firm. Examples include utility companies that provide electricity and natural gas to homeowners. Please draw on your own experiences and what you have learned in Unit 4 to discuss the following points. Please use economic concepts; and use references in your main contribution. Please identify and describe your local utility. Please explain what products or services it provides. Are there other companies that provide these products in your community? Have prices increased in the last 2 years? Please explain. Do you think prices would be higher or lower if there were 2 or more providers? Please explain. Deliverable Length: 200 words (minimum) Reading Assignment Read the following chapters from the Microeconomics textbook: · Chapter 7 · Barriers to Entry, Economies of Scale, p. 98 · Welfare and Monopoly, pp. · Antitrust, pp. · Price Discrimination, p. 104 · Average Cost Pricing, p. 105

Paper For Above instruction

In my local community, the primary utility provider for electricity and natural gas is the municipal utility company, which operates as a natural monopoly. This utility offers essential services that are necessary for residential and commercial use, providing electricity to power homes and businesses, as well as natural gas for heating and cooking. Due to the nature of these services, competition is limited or nonexistent, primarily because of significant barriers to entry such as high infrastructure costs and the need for regulatory approvals, as highlighted in Chapter 7 of the microeconomics textbook (Mankiw, 2021, p. 98).

Currently, the utility has maintained relatively stable prices over the past two years. However, there have been minor increases attributed to rising fuel costs and maintenance expenses. According to economic principles discussed in the text, such as average cost pricing, the utility might justify price increases to cover increasing costs without profit maximization, reflecting the natural monopoly condition (Mankiw, 2021). If additional providers entered the market, competition could potentially lower prices by exerting downward pressure on rates, as supply would increase and monopolistic pricing power would diminish. Nonetheless, given the high fixed costs and infrastructure investment required, competing providers might struggle to establish viable operations, which explains why monopoly persists in utility sectors.

In conclusion, the utility sector remains largely monopolistic due to significant barriers to entry, impacting prices and consumer choice. A shift toward competition could benefit consumers through lower prices, but structural challenges might limit such developments.

References

Mankiw, N. G. (2021). Principles of Microeconomics (9th ed.). Cengage Learning.