Question

select the correct answer.
when does a natural monopoly arise?
a. when a single seller buys or takes over all the competitors in the market
b. when multiple sellers have access to scarce natural resources in a region
c. when economies of scale occur over a relevant range of output
d. when a limited number of sellers decide to jointly sell their products

Explanation:

A natural monopoly occurs when economies of scale are so large that one firm can produce the entire output of the market at a lower average total cost than multiple firms. This is because as output increases, the average cost per unit decreases over a relevant range of output. Option A describes a regular monopoly (not natural) formed through acquisition. Option B is incorrect as multiple sellers having access to resources would not create a natural monopoly. Option D is more related to a cartel or oligopoly - like behavior, not a natural monopoly.

Answer:

C. when economies of scale occur over a relevant range of output