A market which only allows only one firm to operate at lowest average cost is called a(n)
A)natural monopoly.
B)scale industry.
C)increasing returns industry.
D)large scale industry.

Question

Quizplus · Accepted Answer

A natural monopoly is a market in which only one firm can operate at the lowest average cost due to economies of scale. This means that as the firm increases output, its average cost of production decreases, making it very difficult for any new firms to enter the market and compete. Therefore, a natural monopoly has significant barriers to entry and tends to lead to the domination of a single firm in the market.

A Market Which Only Allows Only One Firm to Operate