What is meant by the term natural monopoly?
A)A single producer in a market,usually supported by government subsidies,who is able to produce at a higher cost than competing firms could.
B)A single producer in a market,usually with patent rights,who is able to produce at a cost equal to those of the competing firms.
C)A single producer in a market,usually with large economies of scale,who is able to produce at a lower cost than competing firms could.
D)A single producer in a market,usually with monopoly rights over input resources,who is able to produce at a higher cost than competing firms could.

Question

Quizplus · Accepted Answer

A natural monopoly is a situation where a single producer can supply the entire market with a good or service at a lower cost than any potential competitor. This is often due to the presence of economies of scale, where the cost per unit of output decreases as output increases. As a result, the single producer is able to enjoy a monopoly position in the market because it can produce the output at a lower cost than any potential competitor. Choice C is the best choice as it describes a single producer with large economies of scale that can produce at a lower cost than competing firms could.

What Is Meant by the Term Natural Monopoly