Chapter 77, Problem 3MCQ

To determine

The most common policy approach to a natural monopoly.

Answer to Problem 3MCQ

From the available options, the correct option is price regulation.

Explanation of Solution

Price regulation is the most common policy approach to the natural monopoly because, in this kind of market, competition does not impact the conducting of business as it does not work well. Therefore, the government regulates the price to avoid unregulated monopolies in the market. This market does not cover public ownership or regulations of the government on quantity or quality. And, this market would not be broken down into smaller monopolies.

Therefore, the correct option is b (price regulation).

Economics Concept Introduction

Introduction: A monopoly that involves high start-up costs and barriers to entry and provides the largest supplier in any industry is called a natural monopoly because it covers powerful economies of scale to conduct the business.