Question

A natural monopoly occurs when A. production requires the use of free natural resources, such as water or air. B. the product is sold in its natural state, such as water or diamonds. C. there are economies of scale over the relevant range of output. D. the firm is characterized by a rising marginal cost curve.

Answer 1

Answer: A natural monopoly occurs when "C. there are economies of scale over the relevant range of output.".

Explanation: A natural monopoly arises when there is a total absence of competition, because said company can supply the market at a lower cost and with a higher quality than if there was competition.

The characteristics that this market can present are:

A very high level of investment is required (Economies of scale)

Use of natural resources, which are located in few places on our planet.

Patents that protect technological innovations