A natural monopoly is characterized by the fact that its average costs increase rather than decrease when its output expands.

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In a natural monopoly, there are high fixed costs associated with production and distribution, and the total cost per unit decreases as output expands. However, the average cost per unit increases due to the high fixed costs being spread over a smaller number of units. This results in the natural monopoly being able to operate more efficiently than multiple smaller firms, but also in the potential for them to abuse their market power and charge higher prices.

A Natural Monopoly Is Characterized by the Fact That Its