A natural monopoly,such as a local telephone company,is characterized by _____

Question

Quizplus · Accepted Answer

A natural monopoly is characterized by economies of scale, which means that as the firm produces more, its average total cost decreases. This is due to the high fixed costs involved in setting up the infrastructure necessary to provide the service (such as telephone lines in the case of a local telephone company). As a result, it is more efficient and cost-effective for one firm to produce and provide the service rather than multiple firms competing. So, a natural monopoly has no natural competitors.

A Natural Monopoly,such as a Local Telephone Company,is Characterized by _____