If the minimum efficient scale in an industry were smaller than the size of the market of that industry, then we would have a natural-monopoly situation.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when the minimum efficient scale is larger than the market size, meaning a single firm can produce at a lower average cost than any competitors, leading to a situation where one firm dominates the market.

If the Minimum Efficient Scale in an Industry Were Smaller