Monopoly can be prevented through the following ways
1. By regulation through taxation.; The Govt. can regulate monopoly through taxation. Govt. can levy a tax per unit of output (Specific Tax) or impose a lump sum tax irrespective to its output.
2. By regulation of conditions of monopoly, as in case of natural and regulated monopolies (MC pricing).; The term “public utilities” is applied to such essential services such as water supply, power supply, passenger transport facilities, communication facilities and railway facility. These services should be made available to the society at reasonable prices. Most public utility firms are natural monopolies and are also called as regulated monopolies.
3. By anti-monopoly laws and policies to prevent unfair price discrimination amongst different consumers (Peak load pricing); This is a case of price discrimination peak and off-peak supplies at different prices. Some examples are, electricity has different demand curves at different times during the day. When demand is more, it is called peak period, when less the off-peak period. Hotels at hill stations have peak period in summer and off-peak period in monsoon. Demand for woolens is more in winter (peak period) and less in summer (off- peak period). The traffic rush on roads is more after office hours.