Why does the economy of scale lead to a monopoly situation in the market?

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that a firm experiences as it increases its level of output. With an increase in production, fixed costs are spread over a larger number of units, lowering the average cost of production. This makes it difficult for new firms to enter the market and compete as they have to face high average costs, leading to a monopoly situation.

Why Does the Economy of Scale Lead to a Monopoly