What distinguishes a natural monopoly from a monopoly?
A) One firm can supply the entire range of demand (picture a downward-sloping industry demand curve) at a lower ATC than can any number of firms.
B) One firm has exclusive access to raw materials.
C) The firm has been issued a patent on a cost-saving technology.
D) The government regulates the industry, allowing only one firm to produce.
E) The market contained two firms that merged to become one.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market more efficiently than multiple firms, leading to lower average total costs. This is often due to high fixed costs and economies of scale that make it impractical for new entrants to compete.

What Distinguishes a Natural Monopoly from a Monopoly