may 15, 1900 - Regulation on Natural Monopolies

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The public interest theory of regulation says that the government must regulate natural monopolies to prevent abuses arising from monopoly power.

In industrial regulation, government commissions regulate the prices (usually called “rates”) charged by natural monopolists. The goal is to save for society at least part of the cost reductions associated with natural monopoly while avoiding the restrictions of output and high prices associated with unregulated monopoly. Another goal is to set price equal to average total cost so that the regulated firm receives a normal profit.

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