The defining characteristic of a natural monopoly is
A) positive economic profit.
B) that average cost always exceeds marginal cost.
C) that marginal cost always exceeds average cost.
D) diseconomies of scale.
E) that marginal revenue always equals price.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when the economies of scale are so significant that a single firm can produce the entire output of the market at a lower average cost than multiple firms. This means that average cost always exceeds marginal cost, which is the defining characteristic of a natural monopoly.

The Defining Characteristic of a Natural Monopoly Is