A natural monopoly exists when, throughout the range of market demand,
A)average cost is increasing
B)there are diseconomies of scale
C)there are economies of scale
D)average cost is constant
E)marginal cost exceeds average cost

Question

Quizplus · Accepted Answer

A natural monopoly exists when there are economies of scale, meaning that the average cost of producing a good or service decreases as the level of output increases. This makes it very difficult for new firms to enter the market and compete, as a single dominant firm can produce and sell the good or service at a lower cost than multiple smaller firms.

A Natural Monopoly Exists When, Throughout the Range of Market