Natural monopolies are most likely to occur in markets where fixed costs are very large relative to variable costs.

Question

Quizplus · Accepted Answer

Natural monopolies occur when a single firm can produce a good or service more cheaply than any potential competitor due to high fixed costs of entering the market. In this situation, the firm has a significant cost advantage and is able to operate with low average costs over a large output range, making it difficult for other firms to enter the market and compete.

Natural Monopolies Are Most Likely to Occur in Markets Where