Which of the following correctly describes a natural monopoly?
A)A natural monopoly is an industry in which products are differentiated from one another.
B)A natural monopoly exists if one large firm's long-run average cost curve is upward-sloping.
C)A natural monopoly is defined as a firm that operates in an industry that has significant regulatory barriers to entry.
D)A natural monopoly is an industry that exhibits economies of scale.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than any potential competitor. This is typically due to the presence of significant economies of scale in production, which means that as the firm produces more, its average cost of production decreases. As a result, it can charge a lower price and still make a profit, making it difficult for new firms to enter and compete in the market.

Which of the Following Correctly Describes a Natural Monopoly