Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.

Question

Quizplus · Accepted Answer

Natural monopolies occur in industries where high infrastructure costs and other barriers to entry limit competition. Products that produce substantial network effects, such as social media platforms or utilities, and can be consumed by many users at once without diminishing the product's value to any single user, often lead to natural monopolies. This is because the value of the product increases as more people use it, creating a situation where one provider can serve the entire market more efficiently than multiple competitors.

Natural Monopoly May Result Where Products Produce Substantial Network Effects