For a monopoly to be a natural monopoly,
A) economies of scale must be realized at a scale that is close to total demand in the market.
B) economies of scale must be realized at a scale that is small relative to the market.
C) there must be constant returns to scale.
D) the long-run average cost curve must continue to increase until it hits the market demand curve.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, primarily due to economies of scale. This is realized when the scale of operation needed to minimize costs is large relative to market demand, making it inefficient for multiple firms to operate.

For a Monopoly to Be a Natural Monopoly