A natural monopoly is most likely to result if a single firm:
A) is the only seller in a community.
B) is investor-owned, but is granted the exclusive right by the government to operate in a market.
C) experiences economies of scale over a wide range of output.
D) has gained control over a strategic input of an important production process.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm gains the ability to produce at a lower cost than any potential competitor, typically due to extensive economies of scale. This means that as the firm produces more output, its average cost of production decreases, allowing it to lower prices and outcompete any potential rivals. Therefore, Choice C - which refers to a firm experiencing economies of scale over a wide range of output - is the most likely to result in a natural monopoly.

A Natural Monopoly Is Most Likely to Result If a Single