Asked by alex
hy 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."
Explanation: Electricity and water networks require huge, high‑fixed‑cost infrastructure (power plants, transmission lines, pipes). Because average costs fall as output rises (strong economies of scale), a single provider can supply the whole market more cheaply than multiple firms. This makes competition inefficient and creates a natural monopoly. The other choices (limited natural resources, consumer trust, or “no need” for alternatives) are not the primary economic reason.
Explanation: Electricity and water networks require huge, high‑fixed‑cost infrastructure (power plants, transmission lines, pipes). Because average costs fall as output rises (strong economies of scale), a single provider can supply the whole market more cheaply than multiple firms. This makes competition inefficient and creates a natural monopoly. The other choices (limited natural resources, consumer trust, or “no need” for alternatives) are not the primary economic reason.
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