Question

The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a

group of answer choices
a. profit-maximizing monopoly.
b. producer of externalities.
c. revenue-maximizing monopoly.
d. natural monopoly.

Answer 1

Utilities are regulated as d)natural monopolies because they can supply market demand at lower costs than multiple competing firms, and dividing them would lead to higher expenses and prices.

Step-by-step explanation:

The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a natural monopoly. A natural monopoly occurs when a single firm can supply the entire market demand at a lower cost than if there were multiple competing firms, often due to high fixed costs and relatively low variable costs. This means that dividing a natural monopoly into several competing firms would lead to higher average costs and higher prices for consumers. Public utilities, such as those providing water or electricity, are typical examples of natural monopolies because the infrastructure costs are immense, and it is not practical to have multiple sets of pipes or wires serving the same locations.