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Natural monopoly
Posted 13 January, 2010 by Zechariah J. Walsh from Plano
Dear Sage, my name is Zechariah Walsh from Plano. There is something that i didn't grasp: what is natural monopoly?
FX Sage Answers:
A type of monopoly that exists as a result of the high fixed or start-up costs of operating a business in a particular industry. Because it is economically sensible to have certain natural monopolies, governments often regulate those in operation, ensuring that consumers get a fair deal. The utilities industry is a good example of a natural monopoly. The costs of establishing a means to produce power and supply it to each household can be very large. This capital cost is a strong deterrent for possible competitors. additionally, society can benefit from having natural monopolies because having multiple firms operating in such an industry is economically inefficient.'s a subject which is of chief excellence, Zechariah. Natural monopoly is A type of monopoly that exists as a result of the high fixed or start-up costs of operating a business in a particular industry. Because it is economically sensible to have certain natural monopolies, governments often regulate those in operation, ensuring that consumers get a fair deal. The utilities industry is a good example of a natural monopoly. The costs of establishing a means to produce power and supply it to each household can be very large. This capital cost is a strong deterrent for possible competitors. Additionally, society can benefit from having natural monopolies because having multiple firms operating in such an industry is economically inefficient.
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