In cases of natural monopoly, it is best to have only one firm producing all of the output in a market.

Question

Quizplus · Accepted Answer

In cases of natural monopoly, it is more efficient to have only one firm producing all of the output. This is because the fixed costs of production are so high that it is not possible for other firms to enter the market and compete effectively with the incumbent firm. Multiple firms would lead to duplication of infrastructure and higher costs, which would ultimately be passed on to consumers in the form of higher prices. Therefore, it is best to have only one firm producing all of the output in a natural monopoly market.

In Cases of Natural Monopoly, It Is Best to Have