Which of the following is characteristic of a regulated natural monopoly?
A) Extensive economies of scale.
B) The wasteful duplication of capital facilities in the event of competition.
C) The provision of an essential service.
D) All of these.

Question

Quizplus · Accepted Answer

A regulated natural monopoly is a market situation where the marginal cost of production decreases as the output increases, and the presence of one firm in the market can satisfy the entire demand of the market. These firms are usually granted exclusive rights to provide an essential service, like transportation or utilities. Due to the extensive economies of scale, it is not economically efficient to allow competition in this market. Additionally, competition can lead to the wasteful duplication of capital facilities. Hence, all three options: extensive economies of scale, the provision of an essential service, and the wasteful duplication of capital facilities are characteristics of a regulated natural monopoly.

Which of the Following Is Characteristic of a Regulated Natural