In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-In a natural monopoly, government regulation is often used to ensure more beneficial price and output combinations for consumers in the market than would exist in the absence of regulation.

Question

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-In a natural monopoly, government regulation is often used to ensure more beneficial price and output combinations for consumers in the market than would exist in the absence of regulation.

Quizplus · Accepted Answer

The figure shows the effects of regulation on the market for automobiles. In a natural monopoly, where there is only one producer in the market, the producer may have significant market power and could charge high prices and restrict output. Government regulation can be used to prevent this and ensure more beneficial price and output combinations for consumers. Therefore, the statement is true.

In the Following Figure, the First Panel Shows a Market