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Problem 21

If public utilities are a natural monopoly, what …

01:55
Problem 20

If public utilities are a natural monopoly, what would be the danger in deregulating them?

Answer

Antitrust laws are the laws and regulations that are imposed by government or authorities to
ensure the increased competitiveness in the market. It also helps observe and control mergers
and acquisition taking place between big or key firms.
Natural monopolies are those industries where the initial cost is very high and economies of
scale is achieved by only one firm. Most of the such natural monopolies are firms providing
utilities. Now these monopolies providing utilities are mostly regulated, and if these are
deregulated then the firm would reduce the production quantity and increase price to gain more
profits.


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Video Transcript

everyone. Today we're answering problem number 20 from chapter 11 at the textbook which asks us if public utilities are natural are natural, not these. What would be the danger? And you? Well, there is a huge danger, and I hope you all will notice it. Well, the first thing is, if they were not so monopolies. We know that with natural monopolies, one of the biggest issues is high fixed costs. I hope you'll see where I'm going with this. But if there's already high fixed costs and then you're gonna deregulate it, who knows what you're very low cost is going to be right. Yeah, that could be God. So there's jacked up. Fixed costs, higher fixed costs and deregulation. More volatility. Possibly Morris. So, um, increased fixed costs, already fixed costs and burial costs, makeup, total coughs. We're gonna be adding, Do you regulation who? That could be very, very possibly with. So remember, high fixed costs are always with natural monopolies. Which is why you wouldn't want to make quality to these natural monopolies. And then you're gonna hate it. That's just a no, no, um, way too much. I'm just gonna put, like, $5 signs here. So you got the idea. We're basically just too costly is in you to produce electrical water pipe for every single person that's your face falls who that's expensive. And then who knows what your variable costs are gonna be with deregulation? Too much money. So that's basically your answer. $5 signs. It's too costly if you guys enjoy the state explanation, please with, like one next to it. I hope you all have a nice day. And thanks for union.

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