Question

2.1 Give an example of a natural monopoly industry operating in South Africa. 2.2 State the efficient quantity. Justify your answer. 2.3 Differentiate monopoly quantity from efficient quantity 2.4 Why are monopolies considered to be detrimental to consumers? 2.5 Discuss the effects of the hard lockdown on Eskom's operations? C (2) (2) (2) (6) (8)​

Answer 1

Eskom is one of the natural monopolies that may be found in South Africa. See the definition of Natural Monopoly below.

What is a natural monopoly?

A natural monopoly occurs when there is an instance in which it is economically viable and better for a single entity to be in full and sole control of the production of a product or service.

What is efficient quantity?

The efficient quantity of a good is the amount that makes the good's marginal benefit equal to its marginal cost of production.

Monopoly quantity on the other hand is the point where marginal revenue exceeds the marginal cost, thus requiring the firm to produce the extra unit.

Why are monopolies considered to be detrimental to consumers?

Monopolies are considered to be detrimental to consumers because it prevents competition which helps with increasing efficiency and lowering costs.

What was one of the effects of the hard lockdown on Eskom's operations?

One of the effects of the lockdown on Eskom's operation is that it led to the loss of demand for electricity in the region.

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