Where there is a natural monopoly situation there may be a

Reference no: EM13372449

Where there is a natural monopoly situation, there may be a case for government intervention, either in the form of price regulation (for example, average cost pricing; stipulating a profit level or rate that must be earned), or government ownership. Government intervention usually has good intentions, but often has unintended, adverse side-effects. This essay is about the latter.

Your Tasks

a. Explain why a government might want to regulate a monopolist?

b. What is cost padding?

c. How does cost padding affect the way governments might regulate a natural monopoly?

d. What is gold-plating?

e. How does gold-plating impact on the cost-effective supply of electricity?

f. How can governments negate the adverse side-effects of gold-plating and cost padding?

Reference no: EM13372449

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