Natural monopolies result from
A) patents and copyrights.
B) pricing strategies.
C) extensive economies of scale in production.
D) control over an essential natural resource.

Question

Quizplus · Accepted Answer

Natural monopolies result from extensive economies of scale in production, meaning that as production levels increase, the average cost of production decreases, allowing the firm to provide goods or services at a lower cost than potential competitors. This creates a barrier to entry for new firms, as they would not be able to compete at the same low cost levels. Patents and copyrights may give a firm temporary monopolistic power, but do not necessarily lead to a natural monopoly. Pricing strategies can be used by any firm, regardless of their level of competition, and control over an essential natural resource may give a firm a monopoly power but not necessarily a natural one.

Natural Monopolies Result from