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"In the case of a natural monopoly, production by a single firm results in lower costs...

"In the case of a natural monopoly, production by a single firm results in lower costs of production". Is this statement true or false? Post your explanation. One word posting is not enough.

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Answer #1

"True"

A natural monopoly is defined as the market situation when there is only one firm in the market and that firm have considerable economies of scale. If the same output is given by two different firms they will not be able to achieve economies of scale in the market as they will be producing lower amount of output and at a higher cost. its the economies of scale that allow the firms in the natural monopoly market to produce good at a lower cost.  

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