A natural monopoly exists when which of the following is true? a

Marketing Jan 09, 2021

A natural monopoly exists when which of the following is true?

a. A firm owns all of a specific resource.

b. A government grants an exclusive license to a firm.

c. A firm's scale of operation is large relative to the market.

d. A firm has the most market power.

Expert Solution

A natural monopoly is a different type of monopoly. In the case of natural monopoly the firm supply large relative to the market. In a natural monopoly, the firm always faces economies of scale. As a natural monopoly firm supply large and always face economies of scale hence if a firm's operation scale is large in the market as compared to competitors then the natural monopoly exists. Therefore, option C is correct.

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