📚 Learning Guide
Natural Monopolies
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Natural monopolies are to market efficiency as public goods are to what?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Non-excludability

B

Perfect competition

C

Price discrimination

D

Decreasing returns to scale

Understanding the Answer

Let's break down why this is correct

Answer

Natural monopolies are companies that can provide a service more efficiently than multiple competitors, often because they require large investments in infrastructure, like water or electricity. In contrast, public goods are resources that everyone can use without depleting them, such as clean air or national defense. While natural monopolies focus on efficiency in providing goods or services, public goods highlight the importance of accessibility and shared benefit. For example, a natural monopoly might be a utility company that supplies water to a city, while a public good would be a park that everyone can enjoy without paying a fee. Both concepts highlight different challenges in economics: one about efficient service delivery and the other about ensuring everyone has access to essential resources.

Detailed Explanation

Public goods are non-excludable, meaning no one can be stopped from using them. Other options are incorrect because Some might think public goods work best in perfect competition; People might confuse public goods with price discrimination, which is charging different prices to different people.

Key Concepts

Natural monopolies
Public goods
Market efficiency
Topic

Natural Monopolies

Difficulty

medium level question

Cognitive Level

understand

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