Economics · Market Structures
Consider the following statements: S1: A 'Natural Monopoly' arises in industries where the high fixed costs of infrastructure make it most efficient for a single firm to serve the entire market. S2: Consequently, introducing competition in such sectors often leads to a redundant duplication of resources and higher average costs for the consumer. Which of the following best describes the relationship or function of the second sentence (S2) in relation to the first (S1)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It provides a legal framework for dismantling infrastructure-heavy firms.
- 2It claims that high fixed costs are a sign of corporate mismanagement.
- 3It describes the economic inefficiency that results from introducing competition in a natural monopoly.✓
- 4It argues that competition is the only way to lower costs in a natural monopoly.
Correct answer
It describes the economic inefficiency that results from introducing competition in a natural monopoly.
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