why are utilities, such as electricity and water, examples of natural monopolies? the cost of production…
why are utilities, such as electricity and water, examples of natural monopolies? the cost of production restricts competition in the market. there are limited natural resources to meet demand. consumers only trust known companies to provide these essentials. there is no need for alternative options.
Answer
Brief Explanations:
Natural monopolies occur when high fixed - costs or economies of scale make it more efficient for one firm to produce the good or service. For utilities like electricity and water, the cost of building infrastructure (e.g., power plants, water treatment facilities, and distribution networks) is extremely high. This high cost of production restricts competition as it is difficult for new firms to enter the market and compete with an existing firm that has already spread its fixed - costs over a large customer base.
Answer:
The cost of production restricts competition in the market.