A utility company that provides electricity to a large portion of a county is an example of a natural monopoly good in demand common good price control

Question

Ernest

Social Studies

6 March, 08:49

A utility company that provides electricity to a large portion of a county is an example of a natural monopoly good in demand common good price control

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Chessie · Answer 1

natural monopoly.

Explanation:

The cost involved in being a natural monopoly is usually high, that is why very few firms are allowed to provide the service of a natural monopoly.

For a natural monopoly, the commonest example is electricity service. In order to provide electricity service to a larger portion of a country, there must be provision of power base station and power lines.

The company offering this type of service would also ensure that homes, offices, government buildings are connected to these power lines and grid. Where several firms are involved in providing electricity service to a larger portion of a country, there would be chaos as different power lines would be crossing each others and so many power stations would be built.

Due to the limited firms involved in electricity provision, the whole process of plant installation, power distribution will be cheaper, efficient and safer than allowing multiple firms.