Asked by Bhushan Chaudhari on Jun 05, 2024
Verified
A public utility would be an example of
A) a natural monopoly.
B) an unnatural monopoly.
C) an unregulated private monopoly.
D) a competitive monopoly.
Natural Monopoly
A market condition where due to high fixed costs or unique product, a single firm can supply a product or service to an entire market at a lower cost than two or more firms.
Public Utility
A company providing essential services such as water, electricity, and telecommunications to the public, often regulated by the government.
Unnatural Monopoly
A market structure where a single company dominates due to artificial barriers, such as regulations or patents, rather than market forces.
- Explain the role of public utilities and natural monopolies in the economy.
Verified Answer
MC
Morne CarstensJun 11, 2024
Final Answer :
A
Explanation :
A public utility would be an example of a natural monopoly. This is because the high fixed costs involved in providing utility services such as electricity or water supply make it economically efficient for only one company to operate in a given area. Therefore, competition would be a waste of resources and result in higher prices for consumers. To prevent this, utilities are usually regulated by the government to ensure that prices remain reasonable for consumers while still allowing the company to earn a fair return on investment.
Learning Objectives
- Explain the role of public utilities and natural monopolies in the economy.