A natural monopoly occurs whenA. production requires the use of free natural resources, such as water or air.B. the firm is characterized by a rising marginal cost curve.C. there are economies of scale over the relevant range of output.D. the product is sold in its natural state, such as water or diamonds.
Social Studies · High School · Wed Jan 13 2021
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A natural monopoly occurs when C. there are economies of scale over the relevant range of output.
In a natural monopoly, the cost of producing a good or service decreases as the scale of production increases. This leads to economies of scale, where larger quantities of output can be produced at a lower average cost. Natural monopolies often arise in industries where high fixed costs and infrastructure expenses are significant factors, and a single firm can provide the goods or services more efficiently than multiple competing firms.