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ziro4ka [17]
2 years ago
9

How does a natural monopoly differ from a firm that becomes a monopoly due to network effects?

Social Studies
1 answer:
Elenna [48]2 years ago
7 0

Natural monopolies result through economies of scale, whereas network effects occur when the value of a good or service increases as more people use it.

Natural monopoly arises when a firm becomes the only one capable of providing a product or service within an industry or region. Potential competitors face high barriers from the powerful economies of scale enjoyed by the dominant company.

Often, this is observed in industries that require special raw materials, technology and other uncommon factors of production to operate. Network effects occur when the value of a good, service or other product rises in positive correlation to the number of its users.

Network effects can affect competition in an economy by creating monopolies. For example, smartphones are valuable in themselves, but their values rises with increase in users who can communicate with each other, and rises even more with new apps which have various utilities.

To learn more about natural monopoly:

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The complete question is:

_________is the process by which an increasing proportion of a population lives in cities and has a growing influence on the culture.

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