When an industry is a natural monopoly,what can we expect

Question

Quizplus · Accepted Answer

When an industry is a natural monopoly, it means that a single firm can produce the entire output of the market at a lower cost than multiple firms would. This is usually due to significant barriers to entry, such as high fixed costs or exclusive access to a critical resource. As a result, additional firms in the market would lead to duplication of these fixed costs without a proportionate increase in output, resulting in a higher average cost for each firm. Therefore, we can expect that a larger number of firms will lead to a higher average cost.

When an Industry Is a Natural Monopoly,what Can We Expect