If the distribution of water is a natural monopoly,then

A) (i)and (ii)only
B) (ii)and (iii)only
C) (i)and (iii)only
D) (iii)only

Question

If the distribution of water is a natural monopoly,then

A) (i)and (ii)only 
B) (ii)and (iii)only 
C) (i)and (iii)only 
D) (iii)only

Quizplus · Accepted Answer

(i) and (iii) both highlight the importance of government regulation or involvement in a natural monopoly situation. In (i), government regulation is needed to prevent the monopoly from exploiting consumers. In (iii), government ownership and operation of the natural monopoly is suggested as a way to ensure that the good or service is provided efficiently and fairly to consumers. Both of these options recognize that the market mechanism alone may not be sufficient to ensure that the natural monopoly operates in the best interest of consumers. Option (ii) is not necessarily true if competitive pressures do not exist in the market, which is the case in a natural monopoly.

If the Distribution of Water Is a Natural Monopoly,then