What are some of the challenges caused by a natural monopoly?

1 answer:

7 0

A natural monopoly occurs when the most efficient number of firms in the industry is one. A natural monopoly will typically have very high fixed costs meaning that it impractical to have more than one firm producing the good.

Examples are Gas network, Electricity grid
Railway infrastructure.

A natural monopoly poses a difficult challenge for competition policy, because the structure of costs and demand seems to make competition unlikely or costly.

Hope this helped :D
~Melis

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