Which of the following,if true,would be considered a natural monopoly?
A)The pharmaceuticals industry where patents form a barrier to entry
B)The airlines industry that has high fixed costs and high operating costs
C)The software industry that has very low marginal costs
D)The utilities industry that has falling average costs over the entire range of output

Question

Quizplus · Accepted Answer

A natural monopoly is a situation where it is most efficient for one firm to produce the entire output of a particular good or service. This is usually because the firm can produce at a lower average cost than any potential competitors. In the utilities industry, falling average costs over the entire range of output means that the larger the firm becomes, the lower its average cost of production. This makes it difficult for smaller firms to compete and creates a natural monopoly.

Which of the Following,if True,would Be Considered a Natural Monopoly