Multiple Choice
Antitrust laws have economic benefits that outweigh the costs if they:
1
views
12. Monopoly
Antitrust Laws and Government Regulation of Monopolies
Multiple Choice
Why are public utilities sometimes regulated monopolies?
A
Because utilities are public goods that require a single provider to guarantee universal access and prevent free-riding.
B
Because governments typically nationalize utilities and legally forbid competition to retain political control over essential services.
C
Because banning competition is necessary to encourage firms to innovate and invest in new technology for better service.
D
Because they are natural monopolies—high fixed costs and economies of scale make a single provider most efficient, so the government allows one firm but regulates prices and service.
Verified step by step guidance1
Understand the concept of a natural monopoly: it occurs when a single firm can supply the entire market demand at a lower cost than multiple competing firms due to high fixed costs and significant economies of scale.
Recognize that public utilities (like water, electricity, and gas) often have very high infrastructure costs, making it inefficient for multiple firms to build duplicate networks.
Identify why the government allows only one provider: to avoid wasteful duplication of infrastructure and to ensure efficient service delivery to all consumers.
Understand the role of regulation: since the utility is a monopoly, the government regulates prices and service quality to prevent the firm from exploiting its market power and to protect consumers.
Summarize that public utilities are regulated monopolies because they are natural monopolies where a single provider is most efficient, but government oversight is necessary to balance efficiency with consumer protection.
Related Videos
Related Practice
