Asked by Jessica Sheppard on Jun 11, 2024
Verified
What is the relationship between economies of scale and a natural monopoly?
Economies of Scale
The advantages in cost that companies receive owing to their operational magnitude, with the expense per produced unit generally diminishing as the scale of operations broadens.
Natural Monopoly
A market condition where the cost of production is minimized by having a single firm produce the product, due to high fixed or startup costs.
- Understand the relationship between economies of scale, natural monopolies, and market regulation.
Verified Answer
ZK
Zybrea KnightJun 14, 2024
Final Answer :
A natural monopoly is an industry in which economies of scale are so great that a single firm can produce the industry's product at a lower average total cost than would be possible if more than one firm produced the product.
Learning Objectives
- Understand the relationship between economies of scale, natural monopolies, and market regulation.