Phase IFoundation
Background
Overview
Understanding market failures, the rationale for government intervention, regulatory economics, and the challenges in privatizing or reforming public utilities is crucial for policy analysis.
A natural monopoly arises in an industry where the most efficient scale of production is so large that it can supply the entire market at a lower cost than multiple competing firms, typically due to high fixed costs and economies of scale. This often occurs in infrastructure sectors like electricity transmission and distribution.