Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct

Complete/Correct Question:

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

a. Senator Huff

b. Senator Puff

c. both senators

d. neither senator

D, neither senator

Explanation:

Neither senator Huff or Puff have correct arguments about dealing with natural monopolies.

Monopolies are meant to be regulated to protect consumers. This means that rather than the government owning monopolies or equating price and average cost as suggested by the two senators, the government can instead change the laws and/or lift any restrictions that will break the monopoly.

Cheers

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