A certain town in the Midwest obtains all of its electricity from one company, Northstar Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. True or false

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Business

Jace Richards

18 October, 14:20

A certain town in the Midwest obtains all of its electricity from one company, Northstar Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. True or false

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June Fuentes · Answer 1

False

Explanation:

Monopoly production will lead to a lower output at a higher price compared to the competitive production sice a smaller amount of service is produced and sold at a higher price. So it doesn't make sense to charge a monopoly price.