Question

Which statement is the best definition of a natural monopoly? It is a monopoly that only relates to the use and distribution of water, coal, and other natural resources. It happens when one business can provide a product at a cheaper cost than two or more businesses can. It is a monopoly that cannot be controlled by the government and exists outside any form of regulation. It happens when one business buys out others to dominate a market and control the creation of a product.

Answer 1

It happens when one business can provide a product at a cheaper cost than two or more businesses can. 

Answer 2

The correct answer is: "It happens when one business can provide a product at a cheaper cost than two or more businesses can".

A natural monopoly exists when in a certain market, due to its specific characteristics, the coexistence of two producers is non-viable. Profits could only be generated if there was a single producer..

For example, there is a natural monopoly when in a rural and disperse area, two bus companies operate and both are obtaining losses because they are only able to complete half of the seats on each bus. Meanwhile, if there was only one company, it would be able to earn profits as all the buses would travel full.