Explain why firms that enjoy economies of scale or scope are candidates for regulation

Where economies of scale exist, one firm can produce a good at lower cost than if output were split into two or more firms. In such a natural monopoly situation, it is typical to have just one firm but to regulate it so cost savings can be passed on to consumers. Where economies of scope exist, one firm can produce a bundle of goods more cheaply than two or more separate firms can. Again, that firm may be allowed to produce the bundle of goods but be subjected to regulation so consumers receive the benefit.