asked Jul 5, 2016 in Economics by TotheSea. A natural monopoly usually exists when it's efficient to have only one company or service provider in an industry or geographic location. Solution for natural monopoly exists when O producing a large output has significantly lower marginal cost than producing a small output. Regulations over natural monopolies are often established to protect the public from any misuse by natural monopolies. However, the industry is heavily regulated to ensure that consumers get fair pricing and proper services. For example, a utility company might attempt to increase electricity rates to accumulate excessive profits to owners or executives. All other trademarks and copyrights are the property of their respective owners. Companies that have a natural monopoly may sometimes exploit the benefits by restricting the supply of a good, inflating prices, or by exerting their power in damaging ways other than though prices. An example of a natural monopoly is tap water. Question: A Natural Monopoly Exists When Group Of Answer Choicesa. Natural monopoly arises out of the properties of productive technology, often in association with market demand, and not from the activities of governments or rivals (see monopoly). c. a firm is the exclusive owner of a key resource necessary to produce the firmâ s … 2) A natural monopoly exists when A) the government protects the firm by granting an exclusive franchise. Rent, for example, is a fixed cost.) A natural monopoly exists when a. economies of scale are negligible b. there are a few dominant firms that corner the market c. one firm can produce the market output at lower average cost than two or more firms can d. barriers to entry are low e. only a few firms can minimize cost and maximize profit A monopoly occurs when a company and its offerings dominate an industry. (iii) only c. (i) and (ii) d. (ii) and (iii) ANS: B 12. A firm owns all of a specific r It is also not possible to determine whether the firm is charging a monopoly price. A natural monopoly will typically have very high fixed costs meaning that it is impractical to have more than one firm producing the good. b. the government restricts entry which leads to a single-firm industry. A monopolistic market is typically dominated by one supplier and exhibits characteristics such as high prices and excessive barriers to entry. A natural monopoly usually exists when it's efficient to have only one company or service provider in an industry or geographic location. It happens when one business can provide a product at a cheaper cost than two or more businesses can. A "natural monopoly" or "public utility" occurs where "competition is not feasible." a. it involves the production and sale of natural resources. (iii) a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. B) production can take place with constant returns to scale. B) one firm can supply an entire market at a lower average total cost than can two or more firms. b. a firm's scale of operation is large relative to the market. b. lower for smaller firms than for larger firms. Since natural monopolies use an industry's limited resources efficiently to offer the lowest unit price to consumers, it is advantageous in many situations to have a natural monopoly. B) economies of scale provide large cost advantages to having one firm produce the industry's output. c. a firm has the most market power. A natural monopoly exists when: A) a few firms collude to make one large firm. - Definition, Advantages, Disadvantages & Examples, English 103: Analyzing and Interpreting Literature, Environmental Science 101: Environment and Humanity, Psychology 105: Research Methods in Psychology, Praxis Social Studies - Content Knowledge (5081): Study Guide & Practice, Biological and Biomedical When a natural monopoly exists, it is a. B) the producers in an industry have formed a cartel. C) a firm can engage in price discrimination. A monopoly is the market structure that is ruled by a single seller in the market. A natural monopoly occurs when a firm enjoys the benefits of large scale production in the form of a lower cost of production. Natural monopolies are allowed when a single company can supply a product or service at a lower cost than any potential competitor, and at a volume that can service an entire market. Sciences, Culinary Arts and Personal Unlike traditional utilities, these types of natural monopolies so far have gone virtually unregulated in most countries. Companies such as Facebook, Google, and Amazon have built natural monopolies for various online services due in large part to first mover advantages, network effects, and natural economies of scale involved with handling large quantities of data and information. A Natural Monopoly occurs when it makes the most sense, efficiency-wise, for only one firm to exist in a given sector. (ii) only b. Multiple utility companies wouldn't be feasible since there would need to be multiple distribution networks such as sewer lines, electricity poles, and water pipes for each competitor. c. minimized at the output that maximizes the industry's profitability. A natural monopoly is a firm with such extreme economies of scale that once it begins creating a certain level of output, it can produce more at a far lower cost than any smaller competitor.