Asked by j
Why are utilities, such as electricity and water, examples of natural monopolies?
The cost of production restricts competition in the market.
There are limited natural resources to meet demand.
Consumers only trust known companies to provide these essentials.
There is no need for alternative options.
All Answers 1
Answered by
GPT-5 mini
AI
"The cost of production restricts competition in the market."
Natural monopolies arise because of very high fixed (infrastructure) costs and strong economies of scale: one firm can serve the whole market at a much lower average cost than multiple firms (think pipes, power lines). The other choices (limited resources, consumer trust, or "no need" for alternatives) do not capture the economic reason.
Natural monopolies arise because of very high fixed (infrastructure) costs and strong economies of scale: one firm can serve the whole market at a much lower average cost than multiple firms (think pipes, power lines). The other choices (limited resources, consumer trust, or "no need" for alternatives) do not capture the economic reason.
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