What is the effect of regulation on monopolies according to the described theories?
Understand the Problem
The question is asking about the impact of regulation on monopolies based on various economic theories, specifically seeking to identify which described effect is true among the provided options.
Answer
Regulation prevents excessive pricing and ensures market competition.
The regulation of monopolies is primarily intended to prevent excessive pricing and ensure competition. Government regulation aims to control prices, impose safety standards, and sometimes regulates a monopoly's market behavior to avoid overcharging and protect public interest.
Answer for screen readers
The regulation of monopolies is primarily intended to prevent excessive pricing and ensure competition. Government regulation aims to control prices, impose safety standards, and sometimes regulates a monopoly's market behavior to avoid overcharging and protect public interest.
More Information
Regulating monopolies is crucial to prevent a single entity from controlling market prices and exploiting consumers. It ensures that prices are more aligned with competitive levels, improving accessibility and fairness in the market.
Tips
A common mistake is assuming that all monopolies are detrimental. Some natural monopolies may provide the most efficient service when regulated properly.
Sources
- Regulation of monopoly - Economics Help - economicshelp.org
- 17.3 Regulating Natural Monopolies – Principles of Microeconomics - openoregon.pressbooks.pub
- [PDF] Understanding Regulation - Harvard University - scholar.harvard.edu
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