A country is the only production site in the world for "hyperhoney infinite pasta", a wonderful product produced using a delicate, highly perishable extract obtainable from some trees that grow only in this country. Beyond a very small size, there are no internal or external scale economies at present. Furthermore, there is no domestic demand for this product in the country, so all production will be exported. The country’s government has the choice of forming the pasta-producing industry either as a monopoly or as a large number of small pasta producers that will act as perfect competitors. What is your advice to the country’s government about which market structure to choose for the pasta industry? Why?

A country is the only production site in the world for "hyperhoney infinite pasta", a wonderful product produced using a delicate, highly perishable extract obtainable from some trees that grow only in this country. Beyond a very small size, there are no internal or external scale economies at present. Furthermore, there is no domestic demand for this product in the country, so all production will be exported. The country’s government has the choice of forming the pasta-producing industry either as a monopoly or as a large number of small pasta producers that will act as perfect competitors. What is your advice to the country’s government about which market structure to choose for the pasta industry? Why?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.3P

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