Question

Suppose that there is only one provider of a service in a state. Because this provider experiences economies of scale, the government does not want to break it into smaller pieces, but it does want the provider to supply the efficient quantity. Which of the following policy options might most effectively enable the government to achieve its objectives in this situation? Use antitrust laws to increase competition. Turn the company into a public enterprise. Do nothing at all. Regulate the firm's pricing behavior.

Answer 1

Answer:

Regulate the firm's pricing behavior.

Explanation:

The best option for the government will be to regulate the pricing behavior of. Public policy toward monopoly aims generally to strike the balance implied by economic analysis. Where rationales exist, as in the case of natural monopoly, monopolies are permitted—and their prices are regulated. In other cases, monopoly is prohibited outright. Societies are likely to at least consider taking action of some kind against monopolies unless they appear to offer cost or other technological advantages.