Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. Which of the following statements is most likely to be true? i) New entrants to the market know they will have a smaller market share than PPCo currently has.
Ii) PPCo is a natural monopoly.
Iii) PPCo would experience higher profits if it were government-run.
A) i) and ii) only
B) ii) and iii) only
C) i) and iii) only
D) i), ii), and iii)

Question

Quizplus · Accepted Answer

PPCo is likely a natural monopoly because it can meet the entire market demand at a lower cost than any potential competitor, and new entrants would have a smaller market share due to PPCo's established presence and excess capacity.

Scenario 15-2 Consider a Local, Privately-Owned Electrical Cooperative Named Poweshiek Power Company