Consider a transportation corporation named C.R.Evans,which has just completed the development of a new subway system in a medium-sized city in Western Canada.Currently,there are plenty of seats on the subway,and it is never crowded.Its capacity far exceeds the needs of the city.After just a few years of operation,the shareholders of C.R.Evans experienced incredible rates of return on their investment due to the profitability of the corporation.How can C.R.Evans continue to be a monopolist in the subway transportation industry
A)only if population growth leads to an overcrowding of the subway cars
B)only if there are no new entrants to the market
C)only if demand for transportation services decreases
D)only if the firm decides to offer public shares in the stock exchange

Question

Quizplus · Accepted Answer

The only way for C.R.Evans to maintain its monopoly in the subway transportation industry is if there are no new entrants to the market. If new firms enter the market and offer a similar service, then C.R.Evans will no longer be the sole provider and will have to compete. However, if no new firms enter, then C.R.Evans can continue to operate as a monopolist and charge prices that yield high profits. Population growth and overcrowding may increase demand but would not guarantee a monopoly, and a decrease in demand would decrease profits. Offering public shares in the stock exchange may provide additional capital but would not necessarily maintain monopolistic power.

Consider a Transportation Corporation Named C