Turning first to the policy issue raised by Meade, it is clear that if returns to scale in an industry are increasing up to the point where least cost production can only be assured by a single producer, policy intervention is needed (in any system) Meade’s proposed and, indeed, unattractive policy of fixing employment by policy makers is also inappropriate since it would result in a general equilibrium solution off the contract curve. Steinherr and Vanek (1976) suggest, therefore, a Pareto-optimal policy consisting of a combination of price ceilings (to expand the output of the monopolistic sector) with a lump-sum tax (to equalise marginal returns to factors in both the competitive and the monopolistic sectors).