Answer to Question #79501 in Microeconomics for Musiwalwo

Question

A natural monopoly is typically characterised by what?

Answer 1

A natural monopoly exists in a particular market if a single firm can serve that market at lower cost than any combination of two or more firms.
A natural monopoly is characterized by increasing returns to scale at all levels of output – thus the long run cost per unit (LRAC) will drift lower as production expands.


Answer: A natural monopoly is typically characterized by increasing returns to scale at all levels of output.