What is cost-plus regulation? What about price-cap regulation? Which do you think is the better...

Question:

What is cost-plus regulation? What about price-cap regulation? Which do you think is the better way to regulate prices for natural monopolies? Please explain.

Natural Monopolies:

Natural monopolies are firms that become a monopoly in a certain market through external forces that prevent other firms from competing. This force usually comes in the form of high barriers of entry into the market, such as extremely high infrastructure costs just to enter the market. While natural monopolies may sometimes be necessary, governments attempt to find ways to regulate them.

Answer and Explanation:

Cost-plus regulation

Cost-plus regulation is a form of regulation the government takes in order to regulate the prices a natural monopoly can charge....

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Natural Monopoly in Economics: Definition & Examples

from Intro to Business: Help and Review

Chapter 3 / Lesson 13
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