Question

Should the government regulate the natural monopoly? Explain.

Answer 1

Key points

Natural monopoly emerges in a market in a natural way simply called natural market forces like market conditions and advantages of an industry caused of fixed assets or high start-up cost.In natural monopoly there will be a single company which can provide product or services which is sufficient to satisfy all available market demand.This type of monopoly becomes successful monopoly over a period of time without any unfair business practices.

Normaly the government allowed to natural monopoly to do their business since they serve the interest of the public in common . But sometimes the natural monopoly become a threat to a market when they try to exploit the benefit that they achieved through over a period of time, like when they try to restrict supply of goods , increasing price of the product and services ,increasing electricity rates etc which are against public interest .In such a situation the government make regulation over the natural monopoly inorder to protect the public interest from their misuse by appointing regulatory agencies in each geographical area.