Question

the reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a question 19 options: profit-maximizing monopoly. producer of externalities. revenue-maximizing monopoly. natural monopoly.

Answer 1

A utility is typically a (d) natural monopoly, thus regulating them instead of employing antitrust laws to foster competition makes sense.

A natural monopoly is one in which the largest supplier in the industry, frequently the first supplier in a market, enjoys a significant competitive advantage over potential rivals due to high infrastructure costs and other entry obstacles in relation to the size of the market.

A particular industry qualifies as a natural monopoly if the overall cost of one company generating the full output is less than the total cost of two or more companies doing the same. In that situation, it is likely that one business (a monopoly) or a small number of businesses (an oligopoly) will emerge and offer all or the majority of the pertinent goods and/or services.

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