Monopolies can arise naturally when:
A) a monopoly firm requires the use of natural resources to produce its product.
B) a large firm can produce at lower cost than other small firms.
C) the monopolist product is sold in its natural state, such as water or crude oil.
D) the monopolist product is used to produce other goods.

Question

Quizplus · Accepted Answer

Natural monopolies occur when one firm can produce at a lower cost than other smaller firms due to economies of scale. As the firm expands its production, it can take advantage of cost-saving technologies, increasing returns to scale, and other efficiencies. This allows the firm to lower its prices and outcompete smaller firms, eventually leading to a monopoly. This can occur in various industries such as telecommunications, utilities, and transportation.

Monopolies Can Arise Naturally When