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3 May, 13:10

Which of the following is true about a firm with a natural monopoly?

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  1. 3 May, 13:25
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    The answer is: it can produce and supply its product to an entire market at a lower cost than could a number of smaller firms

    In order to achieve a natural monopoly, a firm need to operates in industry with a very expensive start up costs.

    In such industry, the fixed cost that needed for the operation can be cut down through various technological investment and by acquiring other firms that produce the material needed for the operation.

    When a company acquire a natural monopoly and have strong control over other similar firms and producers of the material, the company would be able to supply its product at a significantly lower cost compared to new firms.
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