A natural monopoly will exist if demand conditions are such that only one firm can survive in an industry.

Question

Quizplus · Accepted Answer

A natural monopoly exists when it is most efficient for only one firm to provide the goods or services demanded by the market. This can happen when the fixed costs of production are very high relative to the variable costs, causing economies of scale that make it impractical for multiple firms to enter the market. As a result, a natural monopoly will typically have little or no competition, allowing it to charge prices above the competitive level and earn economic profits in the long run.

A Natural Monopoly Will Exist If Demand Conditions Are Such