Describe an example of a real-world industry or market that would be considered by economists to be a natural monopoly.
a) What characteristics of the industry make it a monopoly?
b) What is the impact of the monopoly power on its customers?
c) Why might government want to regulate natural monopolies?
d) How might such regulation be structured?
Natural monopoly refers to a firm structure exists because the costs of setting up business in a given industry are too high or the technology needed is extremely expensive. High costs of entry pose barriers to entry for a new entrant.
Answer and Explanation:
a) Water supply is considered to be a natural monopoly since it is inefficient for many firms to incur expenditure on laying pipes throughput the...
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from Intro to Business: Help and ReviewChapter 3 / Lesson 13