From what you know about the different kind of monopolies, which answer best describes the natural ones?
A) They only exist because the government has established patent laws.
B) They can produce services, but not goods.
C) The market supports only two or three firms.
D) Potential competitors are purchased before they can enter.
E) There is a declining ATC throughout the relevant range of production.

Question

Quizplus · Accepted Answer

Natural monopolies often arise in industries where there are significant economies of scale, such as utilities. A declining average total cost (ATC) throughout the relevant range of production means that the more a firm produces, the cheaper it becomes to produce each additional unit. This makes it difficult for new competitors to enter the market, as they cannot achieve the same low costs as the established firm without achieving a similar scale.

From What You Know About the Different Kind of Monopolies