ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -For example, the utility industry is a natural monopoly.

Detailed explanation-2: -Utilities do not operate in a normal free market system where prices and profits are determined by the willingness of consumers to pay. Instead, they are “regulated monopolies” in which public officials guarantee the companies a monetary return on their investments while also fixing prices for consumers.

Detailed explanation-3: -An electric company is a classic example of a natural monopoly. Once the gargantuan fixed costs involved with power generation and power lines is payed, each additional unit of electricity costs very little; the more units sold, the more the fixed costs can be spread, creating a reasonable price for the consumer.

Detailed explanation-4: -Natural Monopoly Examples Telecommunications (Telecoms) Utilities and Energy Sector (Electric Power Supply and Grids) Oil and Gas (O&G) Railway and Subway Transportation.

Detailed explanation-5: -A natural monopoly is a kind of monopoly that arises due to natural market forces. It often occurs in industries where capital costs are predominate, creating economies of big-scale concerning the size of the market. Examples of the natural monopoly include public utilities, such as water services and electricity.