Apr 21 2012

Natural Monopoly

Published by at 7:51 pm under

A market in which the demand for the product intersects the single firm’s average total cost curve while it is still downward sloping. In other words, there is not enough demand to warrant more than one firm producing the good. Society is actually better off with a single producer. Examples include utilities such as electricity and water. Often natural monopolies are regulated by government to assure a more socially optimal level of output and price.

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