A natural monopoly exists when

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 any potential competitor, due to economies of scale. The firm's average total cost curve slopes downward over a large enough range of output, allowing it to spread fixed costs over a larger output and potentially drive out competitors. This can occur regardless of whether natural or man-made resources are used in production, and it may or may not be regulated by the government.

A Natural Monopoly Exists When