A new city is planning to establish a public transportation system. City planners are debating whether to allow multiple private companies to operate bus services or to create a single public entity to manage the entire system. Considering the principles of natural monopolies, which option would likely lead to the most efficient outcome for the residents, and why?

In the case of a public transportation system, a natural monopoly occurs when a single provider can deliver services more efficiently than multiple competitors. This is because the costs of building and maintaining infrastructure, like bus routes and stations, are very high, and having multiple companies could lead to unnecessary duplication of these costs. If the city creates a single public entity to manage the entire bus service, it can streamline operations, reduce expenses, and ensure that all residents receive consistent service. For example, if one company operates all the buses, it can set a uniform schedule and fare system, making it easier for people to plan their travel. In contrast, multiple private companies might lead to confusion and inefficiencies, which could ultimately make public transport less reliable and more expensive for residents.