Question

How are the natural monopolies different than the regular monopolies? Should there be this difference?

How are the natural monopolies different than the regular monopolies? Should there be this difference?

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Answer #1

A natural monopoly is an exceptional case of monopoly where economies of scale are so large that minimum scale of efficiency is not reached until firm becomes sufficiently large relative to the market size. Natural monopolies are common in markets for essential services that require an essential infrastructure to provide the good or service for example electricity, water supply or gas. As the name suggests, natural monopoly creates natural barriers for other firms to enter.

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