When a single firm can supply the entire market at lower cost than two or more firms, we say that the industry is:
A) profit maximizing.
B) a natural monopoly.
C) a bilateral monopoly.
D) a natural competitor.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can produce the entire output of the market at a lower cost than two or more firms. For example, a utility company may have a natural monopoly over the supply of electricity or gas in a particular area due to high fixed costs of production and limited demand. This often leads to government regulation of the industry to prevent the monopolist from charging excessively high prices.

When a Single Firm Can Supply the Entire Market at Lower