What is a major characteristic of a natural monopoly?
A) The firm is a single seller of a resource.
B) It sets price equal to marginal revenue.
C) There is extensive product advertising.
D) There is a large range for economies of scale.

Question

Quizplus · Accepted Answer

A natural monopoly has a large range for economies of scale, which means that the average cost of production decreases as the quantity of output increases. This makes it difficult for new competitors to enter the market and compete with the existing firm, leading to the single firm being the dominant supplier. Options A and B are not necessarily true for a natural monopoly, and option C is not a characteristic of natural monopoly.

What Is a Major Characteristic of a Natural Monopoly