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Chapter 9: Q.9 (page 232)

What is a natural monopoly?

Short Answer

Expert verified

A natural monopoly is a monopoly created because of high fixed cost or economies of scale.

Step by step solution

01

Step 1. Definition

Monopoly is a market structure in which there is only one seller producing a good that does not has any close substitutes.

02

Step 2. Explanation

Natural monopoly is a monopoly that is not by imposing artifical barriers but is created because of reasons such as naturally high fixed cost, economies of scale, resource scarcity.

Gulf countries have a natural monopoly overcrude oil because they have an abundance of oil but it is scarce in rest of the world.

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