Which of the following is a natural monopoly? (LO6) a) the National Football League b) a local phone company c) DeBeers Diamond Company d) IBM

We will evaluate each of the given options (a to d) to see if they fit the definition of a natural monopoly. a) the National Football League (NFL): The NFL is a professional sports league, and while it has exclusive rights to its teams and games, it is not the sole provider of sports entertainment. Other professional sports leagues exist and serve their respective markets. Therefore, the NFL is not a natural monopoly. b) a local phone company: A local phone company may have a monopoly within a specific region, but this is not a natural monopoly. With advancements in technology, there is a possibility for more than one company providing such services in the market. However, in many cases, it is more cost-effective to operate as a monopoly due to high infrastructure costs which leads to economies of scale. c) DeBeers Diamond Company: This company has a long history of controlling the diamond market, mainly through its ownership of diamond mines and marketing efforts. However, it does not fit the definition of a natural monopoly because its market power is not based on production cost advantages. d) IBM: IBM is a technology and consulting company, and it is not the sole provider of technology products or consulting services in its market. There is no natural monopoly advantage in their operations as other firms can provide similar services and products at competitive prices.

Based on our analysis in Step 1, we can see that only option b) a local phone company seems to fit the definition of a natural monopoly. The local phone company may provide services at a lower cost due to high fixed costs and economies of scale. This means that our answer to this question is: (b) a local phone company