ECONOMICS
COMPETITION AND MARKET STRUCTURES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Local governments did not want to pay more than one company to provide phone service.
|
|
|
The federal government chose one company to provide each area with local phone service.
|
|
|
It was inefficient for more than one company to run the wires connecting customers.
|
|
|
Only one company was large enough to provide local phone service to everyone.
|
Detailed explanation-1: -Why did local phone companies have a natural monopoly before the arrival of cellular technology? It was inefficient for more than one company to run the wires connecting customers.
Detailed explanation-2: -A natural monopoly is a type of monopoly that exists typically due to the high start-up costs or powerful economies of scale of conducting a business in a specific industry which can result in significant barriers to entry for potential competitors.
Detailed explanation-3: -A natural monopoly is a market where a single seller can provide the output because of its size. A natural monopolist can produce the entire output for the market at a cost lower than what it would be if there were multiple firms operating in the market.
Detailed explanation-4: -Benefits of natural monopolies The primary benefits associated with natural monopolies include: Efficiency gains: When an organization producing the product or service uses resources efficiently, it usually results in lower production costs and lower prices to the consumer.
Detailed explanation-5: -A natural monopoly is a market structure where there is only one firm that provides a product or service to consumers. There is no competition in a natural monopoly because the barriers to enter the market are so high that it is not profitable for new companies to enter.