A natural monopoly exists when
Question 1 Report
A natural monopoly exists when
Answer Details
The correct answer is one firm can supply the entire market at a lower cost than two or more firms.
A natural monopoly arises in industries where there are very high fixed costs and significant economies of scale. As output increases, the average cost of production falls continuously. This means a single firm spreading its costs over the entire market output can produce at a lower unit cost than multiple competing firms would.
A monopoly created through legislation is a legal or statutory monopoly, not a natural one. A patent-based monopoly is also a legal barrier to entry. Having many small firms in the market contradicts the concept of monopoly altogether.
Download The App On Google Playstore
Everything you need to excel in your exams
