A natural monopoly results when a firm has
A)a license
B)a patent
C)official approval to produce a product
D)decreasing average costs over the range of market demand
E)exclusive use of a natural resource

Question

Quizplus · Accepted Answer

A natural monopoly results when a firm has decreasing average costs over the range of market demand, meaning that as production increases, the average cost of production decreases. This means that one firm can produce the industry's entire output at a lower cost than multiple firms, making it difficult for competitors to enter the market and compete.

A Natural Monopoly Results When a Firm Has