A natural monopoly a. is an example of a government-created barrier. b. exists when a single seller experiences lower average total costs than any potential competitor. c. exists when many sellers experience lower average total costs than potential competitors do. d. exists when a firm has sole ownership of a natural resource. e. is needed to make a profit in the long run.

Question

Paul Mcpherson

Business

19 August, 04:39

A natural monopoly a. is an example of a government-created barrier. b. exists when a single seller experiences lower average total costs than any potential competitor. c. exists when many sellers experience lower average total costs than potential competitors do. d. exists when a firm has sole ownership of a natural resource. e. is needed to make a profit in the long run.

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Rigoberto Carter · Answer 1

b. exists when a single seller experiences lower average total costs than any potential competitor

Explanation:

Natural Monopoly is a kind of powerful advantageous position in an industry, due to high infrastructural costs & high economies of scale benefit. The advantageous position create barriers for the other entrants in the industry. The sole company - having low infrastructural start up costs, cheaper market supply chain management, high economies of scale benefit - has lower average total costs than any potential competitor.

Example : Tap Water. It is feasible to have only one company providing water pipes networks & sewers, as it incurs very huge capital costs to set up a wide network of water supply infrastructure systems.