Natural monopoly exists when:
A) one firm can supply the entire quantity demanded at higher cost than two or more firms.
B) one firm can supply the entire quantity demanded at lower cost than two or more firms.
C) one firm can supply the entire quantity demanded at the same cost as two or more firms.
D) the long-run average cost curve exhibits constant returns to scale.

Question

Quizplus · Accepted Answer

A natural monopoly exists when a single firm can supply the entire market demand at a lower cost than any combination of two or more firms, due to economies of scale.

Natural Monopoly Exists When