For a natural monopoly, the minimum efficient scale is
A)sometimes smaller and sometimes larger than the size of the market.
B)larger than the size of the market.
C)smaller than the size of the market.
D)equal to the size of the market.
E)zero.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can produce the entire output of the market at a lower cost than two or more firms. This is often the case with utility companies, such as electricity and water. The minimum efficient scale is the level of output at which a firm can produce its product at the lowest possible average total cost. In the case of a natural monopoly, the minimum efficient scale is typically larger than the size of the market, meaning that only one firm can efficiently serve the entire market.

For a Natural Monopoly, the Minimum Efficient Scale Is