The assignment consists of one essay question (worth 30 marks) based on text material. Before attempting this assignment you are expected to have read Text chapters 1 to 10. You are encouraged to make use of additional sources. Sources used in your answer should be fully referenced in APA 6th style.
Answer the following question ensuring that you apply economic principles or theory related to the concepts of benefits, costs and market structure in which a firm operates to inform your analysis and support your decisions. Communicate your ideas with correct grammar, spelling and writing style and support your answer with diagrams and illustrative examples as necessary.
Question (30 marks)
Explain how and why governments may want to regulate the price setting of a natural monopoly.
Answers should be typed and diagrams must be clear and neat and preferably drawn electronically. Hand-drawn diagrams are acceptable. Sources used in your answer should be fully referenced in APA 6th style. The answer to the question should be divided into three parts:
Part 1: Introduction
The introduction sets up your response by succinctly stating your understanding of the issues, what you think is the best way to analyse the situation – including choice of theory and sources of evidence, what type of findings you expect and what potential applications you expect there to be.
Part 2: Analysis
The analysis will represent the bulk of your work. Here you will provide your answer in detail by drawing upon the literature, the theory and the evidence to come up with an answer to the question posed. You may find that you want to break this section up into a number of sub-parts – one for a detailed discussion of the issues including your non-technical response, one for a detailed analysis of the tools of analysis you will use (theory), one for your extensive consideration of the evidence, one where you draw together your information and findings along with their implications.
Part 3: Conclusion
In the conclusion, you briefly and succinctly review what you have done in answer to the question and indicate what further issues there might be to be considered.
Sources used in your answer should be fully referenced in APA 6th style.