What made Australia Post a successful monopolist in the 1990s and early 2000s?

What made Australia Post a successful monopolist in the 1990s and early 2000s?

Question
The NBN makes Australia Post’s privatisation inevitable and desirable .Australia Post is a government business enterprise. The corporation reaches more than 10 million Australian addresses;operates 4,462 postal outlets; and serves more than a million customers in postal outlets every business day

Under the Australian Postal Corporation Act 1989, Australia Post has a monopoly over the carriage and delivery of letters up to 250 grams.

In 2012/13, regulated mail volumes (weight) dropped by 5.4%. Indeed, they have been falling at 3% or more per year forthe last six years. Australia Post’s resulting loss on regulated mail was $91.3m in 2010/11, $148m in 2011/12 and $312min 2012/13. And this is despite increasing the price for a stamp: from 50c to 55c in 2008, to 60c in 2010, and witha proposal for the price to rise to 70c this year.

The reason is the internet. As more people move on-line, standard mail volumes drop. Every electronic bill, on-linepayment or e-mail puts another nail in the standard letter’s coffin. And this trend will accelerate, not decline.

a) What made Australia Post a successful monopolist in the 1990s and early 2000s?

b) If Australia Post was a sole provider of postal carriages, describe how will Australia Post set its prices? Will Australia Post be making economic profits? Draw a monopoly diagram and identify the price, quantity and economic profits for Australia Post.

c) Based on the article, standard mail volumes have decreased over the last six years. As a result, Australia Post is making a significant loss. What has changed in this market?

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