Which of the following,if true,is the best example of a natural monopoly?
A)The oil distribution industry where one distribution network serves the whole market
B)The pharmaceutical industry where patents form a barrier to entry
C)The beverages industry where the cost of capital is high and variable costs are low
D)The hospitality industry where variable costs are higher than fixed costs

Question

Quizplus · Accepted Answer

The oil distribution industry fits the definition of a natural monopoly because it is more efficient for one distribution network to serve the entire market due to high fixed costs and low variable costs. It would not make sense for multiple networks to duplicate the same infrastructure and incur duplicate fixed costs.

Which of the Following,if True,is the Best Example of a Natural