Which barrier to entry results in the creation of a natural monopoly?
A) Legal barriers like government franchises.
B) Economies of scale.
C) Ownership of a vital resource.
D) Patents and copyrights.

Question

Quizplus · Accepted Answer

Economies of scale is the barrier to entry that results in the creation of a natural monopoly. As the firm increases its output, it benefits from lower per-unit costs, making it difficult for new firms to enter the market and compete. This allows the existing firm to maintain a monopoly position and earn high profits. Legal barriers, ownership of a vital resource, and patents and copyrights can also create barriers to entry, but they may not necessarily result in natural monopolies.

Which Barrier to Entry Results in the Creation of a Natural