When confronted with a natural monopoly that restricts outpu

When confronted with a natural monopoly that restricts output and charges monopoly prices, the two methods that government have for promoting better outcome are:

A: Public ownership and public regulation.

B: Sole proproetorship and public goods.

C: Antitruct law and horizontal mergers.

D: Creative destruction and laissez-faire.

Solution

When confronted with a natural monopoly, two methods that government have to promote better outcome are -

Public ownership and public regulation : If the monopoly is state-owned such as railways , government can prevent it from exploiting its monopoly status . Also it can regulate prices by imposing price ceiling , imposing average cost pricing . These regulations can help in achieving better outcomes.

Creative destruction and laissez-faire - implies destroying the old economic structure, in this case the monopoly and introducing a competitive structure with minimal or no government intervention