Government seeks to aid economic efficiency in the case of natural monopoly through:

Question

Quizplus · Accepted Answer

Price regulation is the best choice to aid economic efficiency in the case of natural monopoly. Since a natural monopoly has high fixed costs, if a competitor were to enter the market, it would not be able to match the low prices set by the natural monopolist. This is why price regulation is necessary to prevent the natural monopolist from charging excessively high prices and to ensure that consumers are not exploited. The other options, such as creating government-financed corporations or breaking up the natural monopolist, would only lead to more inefficiencies and waste resources. Subsidizing competitors is also not a permanent solution and could lead to further market distortions.

Government Seeks to Aid Economic Efficiency in the Case of Natural