Final answer:
The government regulated natural monopolies, such as water and electricity, to protect consumers from high prices, but beginning in the 1970s, a deregulation movement began due to the ineffectiveness of previous regulations.
Step-by-step explanation:
The government regulated some natural monopolies to guard against excessively high prices to consumers. Natural monopolies, such as those in the water and electricity industries, arise due to the structure of costs and demand where average costs decline over the range of production that satisfies market demand, often because fixed costs are large relative to variable costs. This means one firm can often supply the total quantity demanded in the market at a lower cost than what multiple firms could achieve, making competition difficult.
However, without regulation, a natural monopoly could charge higher prices and may lack the incentive to be efficient or innovative. Therefore, governments have stepped in to regulate prices and production quantities to prevent consumer exploitation. Beginning in the 1970s, policymakers noticed that existing price regulations were not effective, leading to deregulation in several industries to remove government controls and allow for more competition and potentially lower prices for consumers.