Question: Public utilities such as electricity are referred to as natural monopolies and are often subject to regulation by a state authority (the "public Regulatory Commission").
Q1. Explain why a public utility such as electricity is referred to as a "natural monopoly."
Q2. Explain how and why an average cost pricing policy is applied to public utility.
Q3. Discuss how the policy affects the utility's profits and costs.
Q4. Discuss the effects of the policy on the efficiency of the utility.