Question

If the transit system were allowed to operate as an

unregulated monopoly, what output would it supply and what price would it charge?

Short answer

The cost would be exorbitant, and the quantity would be limited.

Step-by-step solution

Step 1. Introduction

Monopoly: Monopoly is a market system in which only one vendor has complete control over the market. It's a market in which the seller sets the price.

Step 2. Explanation

All utility services, such as road, rail, power, and transportation, are normally regulated by the government. People who live in metropolitan regions work and travel. They have all of the amenities, but not everyone can afford to use them. People from various socioeconomic groups are unable to pay for transportation, despite the fact that they must attend work.

The government assists them by providing basic transportation services. Only operating expenditures are included in the ticket price, whereas fixed costs are ignored. Those who desire more services can pay for them and take advantage of the benefits.

However, if the transportation system is uncontrolled, private operators will not consider the public interest. They will consider their own survival and incorporate fixed and variable costs in the ticket price, as well as a little profit. Regardless of who purchases the ticket, the base price will be more than what the government offers.

As a result, the cost will be high, and availability will be limited.