Many Natural Monopolies Are Regulated

question 42

Essay

Many natural monopolies are regulated. Explain the rationale for such regulation.

---

Definitions:

Excess Supply

The situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Absolute Advantage

The ability of an entity to produce a good or perform a service at a lower cost per unit than another entity with the same resources.

Gains From Trade

The economic benefits or advantages that arise from trading goods, services, or resources between individuals, organizations, or countries, typically resulting from specialization and the division of labor.

Comparative Advantage

The ability of an entity to produce goods or services at a lower opportunity cost than others, leading to more efficient trade possibilities.