Question

How should you forecast the outcome for Spirit Electric a natural monopoly?

Answer 1

The company creates a natural monopoly. It means that the company is achieving the economy of scale in its operation. As a result, the company is achieving positive economic profit in the long run. Further, the increase in profit margin also takes place due to increasing return to scale. In this regard, it will be good to go for the exponential moving average for the forecasting of the revenue, outcomes and its services being distributed in the economy. This method will not only include the past data of revenue and sales, but also the forecasted data also. So, there will be a smoothening of the forecasting trend also.
Other than that, multiple regression can also be used to predict the outcome and revenue of the company as this method uses the causal effects and considers the change in independent variables such as income, family size, consumption of power and population among the other factors. So, it will give a causal impact upon the outcome as a dependent variable.