A natural monopoly exists when:

A) unit costs are minimized by having one firm produce an industry's entire output.
B) several formerly competing producers merge to become the only firm in an industry.
C) short-run average total cost curves are tangent to long-run average total cost curves.
D) minimum efficient scale is attained at a small level of output.

Natural Monopoly

A market condition where due to high fixed costs or unique resources, a single company can supply a product or service at a lower cost than any potential competitor, thus dominating the market.

Unit Costs

The price a business incurs for the production, storage, and distribution of a single unit of a certain product or service.

Minimum Efficient Scale

The smallest amount of production a company can achieve while still taking full advantage of economies of scale regarding costs per unit of output.