A natural monopoly forms when _____
A)small firms merge to form larger firms.
B)one firm has control over the entire supply of a basic input required to produce the product.
C)one firm's monopoly position is created and enforced by the government.
D)one firm receives patent protection for certain basic production processes.
E)the long-run average cost incurred by a firm declines as the firm expands output.

Question

Quizplus · Accepted Answer

A natural monopoly forms when the long-run average cost incurred by a firm declines as the firm expands output. This may occur when there are significant economies of scale in production that allow for only one dominant firm to operate efficiently in the market.

A Natural Monopoly Forms When _____