Discussion
______ arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.
Answer: A
A natural monopoly arises when a single firm can supply the whole market at a lower cost than two or more firms could, because the average cost keeps falling over the whole range of market demand, as with water supply or railway lines. Perfect competition has many firms, a duopoly has two, and an oligopoly has few. The answer is natural monopoly, option A. Examples are the supply of water or electricity through one network, where two sets of pipes or wires would waste resources.
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