Question

How are start-up costs related to natural monopolies?

Answer 1

The right answer for the question that is being asked and shown above is that: "The government offers companies money for start-up costs to prevent natural monopolies." start-up costs related to natural monopolies is that The government offers companies money for start-up costs to prevent natural monopolies.

Answer 2

The correct answer is A. High start-up costs prevent others from offering the same service in a natural monopoly.

Explanation:

In the economy, natural monopolies occur when only one company or provider offers a service or product due to natural barriers to compete. One of the most important factors that lead to monopolies is high start-up costs, because if companies or individuals are unable to cover costs of infrastructure and technology then they cannot offer certain services.

An example of this is railways because for a company to offer this service it requires a lot of infrastructures, technology, workers, etc. and therefore the start-up costs or initial cost stop many companies from offering this service letting only one company to do this and therefore creating a monopoly. Thus, start-up costs are related to natural monopolies because "High start-up costs prevent others from offering the same service in a natural monopoly".