Asked Jan 2, 2020

What makes a firm become a natural monopolist, and how does it become a barrier to entry of new firms? Explain.


Expert Answer

Step 1

A natural monopoly happens due to the economies of scale which result in a large range of output but eventually if one firm supplies the entire market then it would lead to no other firm entering without facing a cost disadvantage.

Step 2

 A natural monopoly occurs when a firm is unable to serve the entire market demand which needs to be sustained as a result of the lower cost and without any combination of two or more smaller, more specialized firms. Natural mo...

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