Urban transit systems, especially those with rail systems, typically experience significant economies of scale in operation. Consider the transit system data in Table 11.4. Note that the quantity is in millions of riders. Draw the demand, marginal revenue, marginal cost, and average cost curves. Do they have the normal shapes?
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology required having a wire running to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
so a number of years ago, the Greyhound Bus Company and Trailways Transportation Systems wanted to combined their firms and form just one big firm. The problem was in defining the market. So here we have this, um, two firms, right? And we want to know what market definition would they prefer doing a merger? The market definition one says that the market is would be defined us. The intercity bus service is market two. On the other hand, or mark definition for the market would be a market for inter city bus service. Is personal cars rental cars passing your trains, commercial flights. So we know right that they would prefer definition, too. And why is done well, That's because we can tell that the definition to it's much broader than definition one. It includes a lot more ah, transactions. So when we talk about the percentage of the market the Greyhound owns or trail way owns, the chair's gonna be much smaller under definition, too, which may allow them to get this merger through the government much easier. Then, if they were in market definitional, one