What is NATURAL MONOPOLY?

Because one firm owns, manages, or controls a singularly unique raw material, technology, or other factors, it alone supplies a market’s total demand for a good or service at a price lower than other single firm or group. Such situations do occur, typically in a utility’s situation where the market can only support one producer. Decreasing returns to scale dictate the optimum plant size based on demand. Also long-range average total cost declines with higher output throughout demand’s possible range.

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