If the distribution of water is a natural monopoly, then
A)a single firm cannot serve the market at the lowest possible average total cost.
B)allowing for competition among different firms in the water-distribution industry is efficient.
C)multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.
D)average cost increases as the quantity of water produced increases.

Question

Quizplus · Accepted Answer

Natural monopolies, like water distribution, involve high fixed costs for infrastructure, making it inefficient for multiple firms to build separate networks.

If the Distribution of Water Is a Natural Monopoly, Then