Which of the following statements is (are) TRUE?
I. A natural monopoly owes its existence to economies of scale.
II. In contrast to a monopoly industry, industries served by natural monopolies have no barriers to entry.
III. Natural monopolies have cost structures characterized by small fixed costs and steeply rising marginal costs.

Question

Quizplus · Accepted Answer

I. A natural monopoly exists due to economies of scale, where a single firm can supply a good or service to an entire market at a lower cost than could two or more firms. This makes statement I true. II is false because natural monopolies do have significant barriers to entry, primarily due to the high infrastructure and setup costs involved. III is also false because natural monopolies typically have large fixed costs and decreasing marginal costs, not steeply rising marginal costs.

Which of the Following Statements Is (Are) TRUE