3.4.5 Natural monopoly Flashcards
1
Q
what is natural monopoly?
A
most efficient number of firms in an industry is one
- they typically have very high fixed costs meaning it is impractical to have more than one firm producing the good
- AC will continue to fall - internal economies of scale
2
Q
what are regulations for natural monopolies?
A
they are uncontactable and firms have no real competition - they could abuse their market power without regulations and could set higher prices
