Natural monopolies form when
A)small firms merge to form larger firms
B)one firm has control over the entire supply of a basic input required to produce the product
C)one firm's monopoly position is created and enforced by the government
D)one firm receives patent protection for certain basic production processes
E)long-run average cost declines as a firm expands output

Question

Quizplus · Accepted Answer

Natural monopolies occur when a single firm can supply the entire market at a lower cost than multiple firms due to economies of scale, meaning long-run average costs decline as output increases.

Natural Monopolies Form When