Question

Describe an example of a real-world industry or market that would be considered by economists to be a natural monopoly.

1. What characteristics of the industry make it a monopoly?

2. What is the impact of the monopoly power on its customers?

3. Why might the government want to regulate natural monopolies?

4. How might such regulation be structured?

Answer 1

Describe an example of a real-world industry or market that would be considered by economists to be a natural monopoly.

A Natural monopoly is a syndication in an industry where a high framework cost gives a firm regularly the principal entrant a favorable position over other likely participants and consequently gives them monopoly power.An example of a real-world industry or market that could be considered as Natural monopoly is the Water Supply of your region.

What characteristics of the industry make it a monopoly?

The most significant characteristics of the business which makes it a monopoly is that it is the sole provider of that good or sole supplier of that administrations in your general vicinity and you have no different decisions to choose other than them. Different characteristics includes high hindrances to passage for the industry profit maximization.

What is the impact of the monopoly power on its customers?

Since this industry has the monopoly powers so it impacts the clients by not giving other decision if they are not fulfilled by this firm. This firm may likewise charge the value as indicated by their decision since they have command over market. They can restrict the quantity supplied in the market. Despite the fact that there isn't a lot of effect on clients because of government mediation yet there could be numerous impacts other than those referenced previously.

Why might the government want to regulate natural monopolies?

Government need to manage these natural monopolies because in a large portion of the cases these natural monopolies give fundamental and basic merchandise and enterprises which are significant for individuals' endurance and consequently to accomplish most extreme social advantage or to guarantee individuals are not cheated or individuals don't endure, government attempt to redirect these business sectors.

How might such regulation be structured?

These administration regulations should be structured so that there is no loss to both parties. Government ought to guarantee the cost paid by individuals is reasonable and it ought to likewise guarantee that the imposing monopoly industry don't cause loss because of government regulation.