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Government regulation can easily solve all of the problems associated with natural monopolies. TRUE OR FALSE

Government regulation can easily solve all of the problems associated with natural monopolies. TRUE OR FALSE

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Answer #1

"False".

Natural monopolies are result several factors like controlling the raw material, patents, copyrights or the initial cost of starting production being very high etc. For example, Coca-cola invented a new formula for new aerated drinks it will give Coca-Cola a monopoly over that product. The government can't make a law to force the company to share the formula with other and eliminate the monopoly.

Similarly, a company has achieved an economy of scale which makes it production cost very low. The company sold the product at a cheaper price and eliminated all the competition and came up as a monopoly. Government is ineffective in that case.

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