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What are the characteristics of a natural monopoly, versus those of a regulated monopoly?
What are the characteristics of a natural monopoly, versus those of a regulated monopoly?
Expert Solution
There exist various types of monopolies that have distinct characteristics. Some types of monopolies include:
- Natural monopolies. Natural monopolies are established due to market conditions without any unfair business practice that may limit competition. They are established when a business takes advantage of high entry barriers to an industry which they use to create a wall around its operations. The high entry barriers result from hefty amounts of capital that are required to acquire fixed assets. They are allowed when a single company has the capabilities to supply a good or service to a market at a volume that meets the demand of the entire market and at a lower cost than any potential rival.
- Regulated monopolies. These types of monopolies are usually regulated by the government. They are allowed so that they can offer vital public goods or services at regulated prices. Their main aim is to ensure equality and that citizens receive quality goods and services without being exploited. These monopolies deals in products and services that a government can't entrust to private industries.
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