Question

Why a firm is called a natural monopoly? Explain. Give an example of a public or a
private sector natural monopoly and draw a graph to explain.

Answer 1

Explanation:

What Is a Natural Monopoly?

A natural monopoly is a type of monopoly that exists due to the high start-up costs or powerful economies of scale of conducting a business in a specific industry. A company with a natural monopoly might be the only provider or a product or service in an industry or geographic location. Natural monopolies can arise in industries that require unique raw materials, technology, or similar factors to operate.

Answer 2

Explanation:

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 is impractical to have more than one firm producing the good. An example of a natural monopoly is tap water.