A natural monopoly occurs because:

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can serve the entire market more efficiently and at a lower cost than multiple firms can. This is possible due to economies of scale, where the long-run average cost of production declines throughout the entire range of output. As a result, it becomes impractical or impossible for competitors to enter the market and effectively compete, leading to a lack of competition. While ownership of vital resources or patents can contribute to a firm's monopoly power, they alone cannot explain a natural monopoly.

A Natural Monopoly Occurs Because