Question

The market for public utilities, like gas and electricity, does not exhibit the two primary characteristics that define perfectly competitive markets.

a) true
b) false

Answer 1

a) True

Step-by-step explanation:

The market for public utilities tends to produce natural monopolies, because of the high fixed costs, and the high barriers to entry.

For example, in order to provide electricity, a company has to invest a lot of money to set up the infraestructure (barrier to entry), and once the infraestructure has been put in place, it has to be maintained, which represents very high fixed costs.