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.
A monopoly is a market structure that consists of only one seller but many buyers. A monopoly will result from the following:
- Control of strategic raw materials.
- Issuance of patent rights.
- Existence of economies of scale.
Answer and Explanation:
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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from Intro to Business: Help and ReviewChapter 3 / Lesson 13