Which of the following statements about natural monopolies is true?

A) Natural monopolies are only found in the markets for natural resources (like crude oil and coal) .
B) For natural monopolies, marginal cost is always below average cost.
C) For natural monopolies, average cost is always increasing.
D) Natural monopolies cannot be regulated.

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Liliana Lobaton · Accepted Answer

Final Answer : B, Explanation :  Natural monopolies often exhibit economies of scale over the relevant range of output, where increasing production leads to lower average costs. This is because the fixed costs of infrastructure (like pipelines, cables, or networks) are spread over a larger number of units produced, making marginal cost below average cost, encouraging a single provider scenario for efficiency.

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