The public interest theory of regulation stipulates that government regulation of a natural monopoly is necessary in order to achieve all of the following, except
A) preventing the natural monopoly from harming society through its monopoly pricing.
B) garnering for society at least part of the cost reductions from being a natural monopoly.
C) avoiding the reduction in output associated with monopoly power.
D) eventually breaking up the monopoly to achieve competition within the industry.

Question

Quizplus · Accepted Answer

The public interest theory of regulation aims to achieve the efficient functioning of the market and the protection of the public interest. Breaking up the monopoly to achieve competition within the industry is not necessarily a goal of regulation, but rather a possible consequence if the regulation deems it necessary. The other three options are all goals of regulation under the public interest theory.

The Public Interest Theory of Regulation Stipulates That Government Regulation