What is a natural monopoly? A. A monopoly that results from government issuing patents. B. A...

Question:

What is a natural monopoly?

A. A monopoly that results from government issuing patents.

B. A monopoly resulting from one firm's exclusive ownership of a natural resource required to produce a good.

C. A monopoly that results when one firm is able to produce at a lower cost than multiple firms giving large firms with higher levels of output advantage over small competitors.

D. A market in which there is only one firm.

Monopoly:

A monopoly is a market structure that consists of only one seller but many buyers. A monopoly will result from the following:

  1. Control of strategic raw materials.
  2. Issuance of patent rights.
  3. Existence of economies of scale.

Answer and Explanation:

(C)

When a firm is able to produce goods or services at a very low cost compared to other firms in the industry, it can attach a low price on its products that other firms cannot compete with. Other firms will probably exit the market because if they attach a similar price on their goods and services they will eventually make a loss.


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Natural Monopoly in Economics: Definition & Examples

from Intro to Business: Help and Review

Chapter 3 / Lesson 13
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