If it is not profitable for more than one firm to be in an industry, we have an example of
A) monopoly due to ownership of key resources.
B) monopoly due to governmental entry restrictions.
C) monopoly due to economies of scale.
D) pure competition.

Question

Quizplus · Accepted Answer

When it is not profitable for more than one firm to be in an industry, it is usually because of economies of scale. This means that the cost advantages of large-scale production allow one firm to produce and sell at a lower cost than any potential competitors, creating a natural monopoly. This is different from a monopoly due to ownership of key resources (A) or governmental entry restrictions (B). Pure competition (D) is characterized by the presence of many small firms, each selling an identical product, and no single firm has control over the market.

If It Is Not Profitable for More Than One Firm