Abstract
A natural monopoly can meet the market demand alone cheaply than several firms together can. A natural monopoly enjoys the economies of scale of production, marginal cost decreases at least in the range of market demand for its product. Assuming a decreasing linear marginal cost function, this paper derives all the competitive, regulatory, and monopoly equilibrium formulae of a natural monopoly model using the price gap and adjustment weights. If also offers welfare analysis and all possible comparisons. It also derives a formula for the minimum compensation that should be made to the natural monopoly to offer the competitive output. Any results of this paper can be applied independently.
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