In the case of a natural monopoly, production by a single firm results in lower costs of production.

Question

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A natural monopoly occurs when a single firm can produce at a lower cost than multiple firms. This is because the fixed costs of production are so high that it is more efficient for one firm to produce than for multiple firms to enter the market and each produce at a smaller scale. As a result, the single firm can enjoy economies of scale and lower average costs, making it the most efficient producer in the market.

In the Case of a Natural Monopoly, Production by a Single