When a natural monopoly exists, it is always more cost-effective for two or more private firms to produce the product.

Question

Quizplus · Accepted Answer

When a natural monopoly exists, it is more cost-effective for a single firm to produce the product. This is because there are high fixed costs involved in setting up production facilities, and if multiple firms split the market, the cost per unit of production will increase, leading to inefficiencies and higher prices for consumers. It is often more efficient to regulate the natural monopoly to ensure fair pricing and quality service for consumers.

When a Natural Monopoly Exists, It Is Always More Cost-Effective