Question

Why do governments regulate natural monopolies? To allow only certain consumers to have access to goods and services To have access to the resources when national security is at risk To prevent prices from rising too high and to increase efficiency To prevent single suppliers from continuing to dominate a market

Answer 1

The answer to this would be the 4th option. Because monopolies allow businesses to compete against each other for profit and reputation. Without monopolies, people would only choose one company over the other because it just is more superior. Monopolies is what make businesses grow, and unfortunately, they aren't a good thing at times.

Answer 2

Natural monopolies are regulated by the government to prevent excessive price increases and to boost efficiency. Natural monopoly is a kind of monopoly that incurred due to natural market forces.

So, the correct option is C. "To prevent prices from rising too high and to increase efficiency".

When average costs decline along the spectrum of production that fulfils market demand, a natural monopoly emerges, allowing a single firm to produce the majority of market's product at a lower cost than competing enterprises. When the government intervenes through regulations, it helps to regulate prices to level that is acceptable by both customers and producers as well as increase efficiency.

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