Please explain in detail1) What is natural monopoly and when we w.pdf

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Please explain in detail: 1) What is natural monopoly and when we will have natural monopoly in the market? (4 points) 2) What types of industry are susceptible to have natural monopoly? (3 points) 3) What is \"information asymmetry\"? (3 points) Solution Answer: 1) Natural monopoly exists where only single firm dominates the market. It is quite efficient if single firm dominates the market. When single firm can deliver the output objective more efficiently than the more firms, in such situation we have natural monopoly. 2) Generally public utilities such Railways, Gas, eletricity etc industries are susceptiable to have natural monopoly. Such industries require huge infrastructural investments and if competition is allowed in such field, it would only lead to inefficiency and lower output. 3) Information asymmetry implies the unequal distribution of informations between the buyer and seller. one party has comparatively or relatively more information than the other party. Hence it leads to the inefficient economic decisions..

Please explain in detail:
1) What is natural monopoly and when we will have natural monopoly in the market? (4 points)
2) What types of industry are susceptible to have natural monopoly? (3 points)
3) What is "information asymmetry"? (3 points)
Solution
Answer: 1) Natural monopoly exists where only single firm dominates the market. It is quite
efficient if single firm dominates the market. When single firm can deliver the output objective
more efficiently than the more firms, in such situation we have natural monopoly.
2) Generally public utilities such Railways, Gas, eletricity etc industries are susceptiable to have
natural monopoly. Such industries require huge infrastructural investments and if competition is
allowed in such field, it would only lead to inefficiency and lower output.
3) Information asymmetry implies the unequal distribution of informations between the buyer
and seller. one party has comparatively or relatively more information than the other party.
Hence it leads to the inefficient economic decisions.

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