A natural monopoly occurs when:
A)the monopolist product is an organic, pesticide-free product
B)firms are characterised by rising marginal-cost curves
C)average total cost of production increases as more output is produced
D)average total cost of production decreases as more output is produced

Question

Quizplus · Accepted Answer

A natural monopoly occurs when the average total cost of production decreases as more output is produced. This means that a single firm can produce the entire output of the market at a lower cost than two or more firms could. This is often the case in industries with high fixed costs, such as utilities or infrastructure, where there are significant economies of scale.

A Natural Monopoly Occurs When