What is a key criterion involved in deciding a natural monopoly? a. Size of the
ID: 1127638 • Letter: W
Question
What is a key criterion involved in deciding a natural monopoly?
a.
Size of the firm relative to its competitors.
b.
Size of the firm relative to the total market demand for a product.
c.
Magnitude of profits generated by the company.
d.
A firm's ability to adapt to market changes.
a.
Size of the firm relative to its competitors.
b.
Size of the firm relative to the total market demand for a product.
c.
Magnitude of profits generated by the company.
d.
A firm's ability to adapt to market changes.
Explanation / Answer
B) Size of the relative to the total market demand for the product
The natural monopoly refers to that monopoly power enjoyed by the firm due unique feature of the goods, a control over the resources, or technology, for example, Coca-Cola company enjoys monopoly power in soft drink manufacturing industry due to customer taste and preference, similarly, Coca-Cola company also enjoys the technological edge over the others firms and it helps to produce large-scale output with minimum costs.
And thus thse factors make firms to increase the size f the markets.
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