A natural monopoly exists when
A)the good produced by a monopoly is classified as a natural product.
B)the monopoly-level of market power develops naturally due to the company's high product quality.
C)producing a large output has significantly lower marginal cost than producing a small output.
D)exploitative business tactics are used to force other companies out of the market illegally.

Question

Quizplus · Accepted Answer

A natural monopoly exists when producing a large output has significantly lower marginal cost than producing a small output. This means that it is cheaper for one company to produce the entire output of the market than to have multiple companies producing smaller quantities. This can occur due to high fixed costs or economies of scale.

A Natural Monopoly Exists When