Question

Natural monopolies are regulated by government agencies. TRUE OR FALSE

Answer 1

"True"

Natural monopolies are the result of monopoly coming out of reasons like a control over the raw material, having a unique invention, or achieving economies of scale. In such a case government agencies are almost ineffective against such monopolies but they still try to regulate it.

For example Railways, The initial cost of starting railway services are so high that no other player is ready to enter the market except the government, it becomes a monopoly. It is regulated by government providing a subsidy to lower the price or putting a price cap. The result is a railway in a loss and draining government resources. if the same is done with a private company it will shut down its operation in the long run. Causing loss to the consumer.