Answer
It could limit the prices that the company charges customers. Additionally, it could require the company to obtain approval before making specific decisions. A natural monopoly occurs when a single firm is able to serve the entire market demand for a specific product more efficiently than multiple firms could. This typically arises in industries with significant start-up costs, specialized raw materials, or unique technologies. In such scenarios, the firm enjoys significant economies of scale. Governments regulate natural monopolies chiefly to safeguard consumer interests. Given that a natural monopoly can set its prices at will, as it is the sole provider, the government reviews the company’s historical costs to implement regulations. They may impose a price cap, limiting how much the firm can charge over a defined timeframe. It is expected that the natural monopoly will operate rationally within these constraints. Nevertheless, the government retains the authority to mandate that the monopoly seek approval for certain decisions, such as when it plans to adjust the volume of goods it supplies.
Related Questions
- In a mixed market economy, what are typical ways the government can reduce unemployment? For example
- Based on your budget of $2,500, which transportation option is the best financial decision for you?
- What questions should someone consider when deciding whether to lease or buy a car? Check all that a
- Acquiring, storing, and inventorying resources are part of which NIMS management characteristic?
- How would a manufacturer benefit from using fewer scarce resources? Would the product be less expens
- Why did Maggie not have flood insurance? Check all that apply. A. Storms in her region are highly un
- Which of the following best illustrates the decision-making process for producing a specific product
- What are the most likely uses of capital invested in a business? Please check all that apply: paying
- How can a government regulate a natural monopoly? Check all that apply: a. It could buy out the comp
- Can you create a simple outline for your paragraph by identifying the introductory and concluding po