Government agencies often regulate the price natural monopolies charge because, if left unregulated, natural monopolies will

Question

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Natural monopolies have high fixed costs and low marginal costs, which means that they can produce at a lower cost per unit than any potential competitor. If left unregulated, they would charge a price greater than average cost to maximize profit, resulting in higher prices for consumers. Therefore, government agencies regulate their prices to ensure they do not exploit their monopoly power to the disadvantage of consumers.

Government Agencies Often Regulate the Price Natural Monopolies Charge Because