A natural monopoly exists when:
A)a few firms collude to make one large firm.
B)economies of scale provide large cost advantages to having one firm produce the industry's output.
C)firms naturally maximize profit regardless of market structure.
D)firms enter the industry as a result of profit incentives.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when economies of scale are so large that they provide a significant cost advantage to a single firm producing the entire output of the industry, making it difficult for other firms to enter and compete. This can result in high barriers to entry and limited competition.

A Natural Monopoly Exists When