The trade-off for natural monopolies weighs the benefits of economies of scale against the loss of consumer surplus.

Question

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Natural monopolies exist when a single firm can produce goods or services at a lower cost than two or more competing firms. This often leads to economies of scale, which allows the firm to sell goods or services at lower prices to consumers. However, the downside is that there is less competition, which can mean less innovation and potentially higher prices for consumers. Overall, the trade-off is between the benefits of economies of scale and the loss of consumer surplus.

The Trade-Off for Natural Monopolies Weighs the Benefits of Economies