Question

What is a natural monopoly? Will a naturally monopolistic industry always consist of a single producer? Are there any differences in the features that characterise a natural monopoly in a single product industry and those that characterise a natural monopoly in a multi-product industry? Justify your answers.

Answer 1

Natural monopoly is the the monopoly in which high infrastructural costs and size of industry restricts a firm to enter into the market thereby providing the largest supplier in the market advantage over other competitors

Just because a company is operating under a natural monopoly it does not mean that only a single producer in taking advantage other similar frims in the industry also takes advantage of this

In a single product industry only one or two firms takes advantage of its monopoly in producing a product but in a multi product industry for each product there may have 1 or 2 players exploring the benefits of the monopoly market