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A Natural Monopoly: Analyse a regulated natural monopoly of your choice. Discuss the regulatory framework, its economic rationale, pricing and incentives, efficiency and welfare, alternatives and...

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A Natural Monopoly: Analyse a regulated natural monopoly of your choice. Discuss the regulatory framework, its economic rationale, pricing and incentives, efficiency and welfare, alternatives and related policy issues.
Answered Same Day Apr 04, 2020

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Monika answered on Apr 09 2020
133 Votes
Natural Monopoly
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[Natural Monopoly]
Natural Monopoly
It is a type of monopoly that may arise when the requirement of large scale of infrastructure to ensure supply. Means there is requirement of very high fixed cost to deliver any product or service and to start certain business.it generates a situation where natural monopoly is delivered a product for one business than multiple businesses more efficiently. In the case of monopoly, a loss of efficiency created by encouraged new entrance into market that means try to increase competition (Train,1991).
Example of infrastructure include pipeline for water and gas, grids and cables for electricity supply, networks for unground and rails.
Railways as Natural Monopoly    
The typical example of natural monopoly is considered to be railways. To build a network and lay a track in railway are more costly. The entry of competitor would be determined or prohibited by the cost of leasing and buying train. For society it is wastage of money, the overall cost that are associated with the build and run a network of railways would be wasteful.
Regularity framework
In market, it allowed only one firm to supply efficiently because wasteful duplication of the resources would be meant allowed competition. Economy of scale are important because they mean, they can become more efficient if the...
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