Which of the following would create a natural monopoly?
A) ownership of all the available units of a necessary input
B) an exclusive right granted to supply a good or service
C) requirement of a government license before the firm can sell the good or service
D) technology enabling a single firm to produce at a lower average total cost than two or more firms
E) a patent granted the producer of the good or service

Question

Quizplus · Accepted Answer

Technology that enables a single firm to produce at a lower average total cost than two or more firms is the characteristic that would create a natural monopoly. This allows the firm to produce at a lower cost and therefore sell at a lower price than any potential competitor, making it very difficult for new firms to enter the market.

Which of the Following Would Create a Natural Monopoly