The Chapter discusses the market structure known as monopoly. Electric utilities were considered monopolies until deregulation began in the mid 1990s. Use the internet to explore some of the issues of changing from a monopoly. Click on the SRP homepage. Salt River Project, or SRP, is an electric utility, a local monopoly until deregulation in 1998/9. See what you can find about issues involved in the changing market structure. In particular, try to find information about "stranded costs."

Questions

1. What are stranded costs?
2. Why is stranded costs an issue of concern?
3. Why would there be stranded costs if a monopoly is converted to a competitive industry?
4. How would you handle the stranded costs issue?