Asked by Brent Markovich on May 13, 2024
Verified
Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.
Natural Monopoly
A type of monopoly that occurs when a single firm can supply a market with a good or service more efficiently and at a lower cost than could be achieved by multiple competing firms, due to economies of scale.
Network Effects
The effect that additional users of a product or service have on the value of that product to others, where the value increases as more people use it.
Substantial Network
A concept in economics and business that typically refers to a network within a market that has a significant user base or utility, making it valuable and influential.
- Recognize the economic and operational characteristics of natural monopolies.
Verified Answer
JZ
Jazmin ZamoranoMay 19, 2024
Final Answer :
True
Explanation :
Natural monopoly refers to a situation where one firm can produce at a lower cost than any potential rival because of factors such as economies of scale or substantial network effects. Products with substantial network effects, such as social media platforms or telecommunications networks, can be simultaneously consumed by a large number of consumers and therefore create a natural monopoly.
Learning Objectives
- Recognize the economic and operational characteristics of natural monopolies.