A natural monopoly is a situation that occurs
A) when an exotic plant kills off locals plants
B) in industries where the cheapest way to obtain a given quantity of output is to have only one firm produce it
C) Both answers are correct

Question

Quizplus · Accepted Answer

A natural monopoly is when one firm can produce the good or service at a lower cost than multiple firms would be able to. This is typically due to the high fixed costs required to enter the industry. Therefore, it is most common in industries where economies of scale are significant, making it cheaper for one firm to produce the entire output. This is why the correct answer is B, as it accurately captures the nature of a natural monopoly. A is incorrect as it refers to a different concept unrelated to the economic definition of a natural monopoly. C is incorrect as it only repeats the correct answer without any additional explanation or justification.

A Natural Monopoly Is a Situation That Occurs