Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Regulation always leads to higher prices for consumers
B
Regulation can potentially lower prices and improve service for consumers
C
Regulation has no effect on consumer welfare
D
Regulation only benefits the monopoly and not the consumers
Understanding the Answer
Let's break down why this is correct
Answer
Natural monopolies occur when a single company can supply a good or service more efficiently than multiple competing companies. Regulation is important in this context because it helps ensure that consumers are treated fairly and that prices remain reasonable. Without regulation, a natural monopoly might charge very high prices since there are no competitors to keep them in check. For example, a local water company might have no competition and could raise prices significantly if not regulated, making it hard for families to afford water. Therefore, regulation protects consumer welfare by promoting fair pricing and ensuring that essential services are accessible to everyone.
Detailed Explanation
Regulation can help lower prices and improve services for consumers. Other options are incorrect because Some people think regulation always raises prices; It's a common belief that regulation does nothing for consumers.
Key Concepts
Regulation of natural monopolies
Impact on consumer welfare
Examples of natural monopolies
Topic
Natural Monopolies
Difficulty
hard level question
Cognitive Level
understand
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