Possible Solutions ·Natural monopoly Break it up-but that raises costs,creates an unstable situation ·Regulate it? If it is forced to sell at MC it goes broke,since it presumably has fixed costs as well So either sell at MC and have a government subsidy Or try to make it sell at average cost This runs into the obvious regulatory problems ·Artificial monopoly Not a problem if it doesn't exist Various laws try to prevent selling below cost But that also hurts a new firm trying to break into the market Prevent mergers that will create a firm with very large market share State monopoly:The simple solution is not to have itPossible Solutions • Natural monopoly • Break it up—but that raises costs, creates an unstable situation • Regulate it? • If it is forced to sell at MC it goes broke, since it presumably has fixed costs as well • So either sell at MC and have a government subsidy • Or try to make it sell at average cost • This runs into the obvious regulatory problems • Artificial monopoly • Not a problem if it doesn’t exist • Various laws try to prevent selling below cost • But that also hurts a new firm trying to break into the market • Prevent mergers that will create a firm with very large market share • State monopoly: The simple solution is not to have it