One single firm is the best option in such circumstances and is then considered a natural monopoly It is not financially feasible, nor is it practical to give several companies the freedom to create multiple stations and tracks.
![which one of the four railroads in monopoly was not a real railroad? which one of the four railroads in monopoly was not a real railroad?](https://static.wixstatic.com/media/cf5f9d_442273051d884b718fedb0fa5451b900~mv2.jpg)
In a city, the government cannot allow several companies to handle the power lines as it will not be feasible. The utility is one of the prime examples of natural monopoly.The government is on the look-out for such natural monopoly firms and are trying to curb their activities. There are several industries which are still not under any regulatory body and have abused the trust of their consumers, for instance, cable companies located in particular regions.
![which one of the four railroads in monopoly was not a real railroad? which one of the four railroads in monopoly was not a real railroad?](https://i.ebayimg.com/images/g/~9MAAOSwQZFdDAI-/s-l300.jpg)
It is important to place regulatory bodies to prevent any misuse of power. It will not allow AB to Travels to increase prices without any justified cause. In the above example, it is the regulatory body that will act as a mediator and convince the bus company to take a hike in prices that will not cause too much concern in the mindset of the passengers.
![which one of the four railroads in monopoly was not a real railroad? which one of the four railroads in monopoly was not a real railroad?](https://atlantablackstar.com/wp-content/uploads/2015/02/UndergroundRailroad_4205F10_ONLINE.jpg)
Common reasons for having regulations are as follows. The company might not have an option because of the rise in petrol and diesel prices, which the passengers are unwilling to understand.Īlthough the government allows the existence of natural monopoly, it has set up regulatory bodies like the Federal Trade Commission Bureau of Competition to protect the consumers. It is at such times you need a regulatory body that can help in a compromise after looking at the situation from every angle. Suddenly it increased the base fare to Rs 70 and the km per rate to Rs 9.Īs it had a natural monopoly over the particular geographical area, the passengers had to pay even after serious grumbling. The base price of the tickets was Rs 50 for traveling from one city to another and Rs 7 for every km.
![which one of the four railroads in monopoly was not a real railroad? which one of the four railroads in monopoly was not a real railroad?](https://lh3.googleusercontent.com/-7Cn8775NzmM/VywiTZiCovI/AAAAAAABNSQ/dCtLkT55cQ4/w1200-h630-p-k-no-nu/junction-valley-railroad-66.jpg)
It becomes necessary to protect consumers from any misuse of power.ĪB Travels is a bus company with a natural monopoly over a particular state. Sometimes the firms start exploiting to increase their profits by restricting the supply to increase the prices. Societies benefit when utilities are treated as natural monopolies as it is economically more feasible. Some companies might have a monopoly in one region whereas the other in another place.Ĭable companies are a prime example of geographically based natural monopoly companies. Just because one company has a natural monopoly, it does not mean that it is the only existing organization in the industry. Sometimes a single firm with a natural monopoly provides a service or product in a particular geographic location as well as in an industry which needs a unique or distinct technology or raw materials for the operation.Ī natural monopoly is allowed to exist and flourish in the market because it can supply specific service or product at a cost that is very lower than any potential rival can and that too in bulk to meet the demand of an entire market. The competitors do not compete because they are aware that large economies of scale are involved that will make their journey very difficult. It generally occurs without any unfair play or business practices that might stifle rivalry.Ī company simply takes advantage of certain conditions and creates a protective shield around its business operations. Natural monopoly will occur only because of either specific market conditions or because of a unique product.