The government often allows only one company to provide electricity in a given geographic area because allowing several companies to do so would result in an inefficient duplication of infrastructure. What does this suggest about electric utilities?
A) They are natural monopolies.
B) They are oligopolies.
C) They are duopolies.
D) They are offering customers the right to choice.

Question

Quizplus · Accepted Answer

The fact that only one company is allowed to provide electricity in a given geographic area suggests that electric utilities are natural monopolies. This means that due to the high fixed costs required to provide electricity (such as building and maintaining infrastructure), it is more efficient to have only one company provide the service rather than multiple companies duplicating the infrastructure.

The Government Often Allows Only One Company to Provide Electricity