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Chapter 11: Q. 20 (page 272)

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

Short Answer

Expert verified

Deregulation has the risk of allowing enterprises to deliver services on their own terms.

Step by step solution

01

Step1. Introduction

Basic services provided to the general public are known as population utilities. Examples of public utilities include water, electricity, and gas.

02

Step2. Explanation

Because they have already invested in their own pipes, electrical cables, and other expensive and necessary equipment to provide services, public utility firms have a natural monopoly. If the government doesn't own them, it regulates them by establishing a maximum price, quality standards, and a competitive criterion. Private businesses will operate independently and abuse the situation if it does not regulate them.

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