Question

If the distribution of water is a natural monopoly, then (i) multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. (ii) allowing for competition among different firms in the water-distribution industry is efficient. (iii) a single firm can serve the market at the lowest possible average total cost. Group of answer choices

Answer 1

Answer:

The question is incomplete, the options are missing. The options are the following:

A) (i) and (iii) only.

B) (ii) and (iii) only.

C) (i) and (ii) only.

D) (iii) only.

And the correct answer is the option D: (iii) only.

Explanation:

To begin with, the concept known as "Natural Monopoly" is understood to be the structure of market in where the organization that is considered to be a natural monopoly is the only seller in the market it is because the company has huge economies of scale and due to that reason it will naturally gain the whole market and the other companies will not be able to compete and will exit the market. So therefore that when there is a natural monopoly a single firm can serve the market at the lowest possible average total cost.