When an industry is a natural monopoly, A. it is characterized by constant returns to scale.
What is a natural monopoly?
A natural monopoly arises from high start-up costs or long economies of scale, and barriers to entry.
A natural monopoly is known for these characteristics:
- It is naturally occurring.
- It has extraordinarily large fixed costs.
- The marginal costs are low.
- It has powerful economies of scale.
- Competition is Undesirable.
Thus, when an industry is a natural monopoly, A. it is characterized by constant returns to scale.
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