Answer to Question #316321 in Microeconomics for Hghj

Question

Explain the problem with imposing competitive pricing in the case of a natural monopoly.

Answer 1

Imposing competitive pricing in a natural monopoly will render competition to be very costly. This is because a natural monopoly arises when the fixed costs are much more than the variable costs. Therefore one company is able to produce the quantity demanded at lower costs than two or more companies