In many cases additional firms do not try to compete with a natural monopoly because:
A)the natural monopoly doesn't make a huge profit
B)they are unsure of the size of the market in general
C)they know they cannot achieve the same low costs that the monopolist enjoys
D)they fear retaliation in the form of pricing wars from the natural monopolist

Question

Quizplus · Accepted Answer

Natural monopolies are able to produce at a lower average cost than any potential competitor due to economies of scale. This makes it difficult for new firms to enter the market and compete because they cannot achieve the same low costs. Therefore, choice C is the best answer.

In Many Cases Additional Firms Do Not Try to Compete