5. Natural Monopoly
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Last updated 11:42 AM on 4/18/26
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4 Terms
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Features of Natural Monopoly
Huge Fixed Costs
Enormous Potential for Economies of Scale
Rational for one firm to supply the entire market (competition is undesirable)
Competition would result in a wasteful duplication of resources and non-exploitation of full economies of scale (allocative and productive inefficiency)
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LRAC Curve of a Natural Monopoly with MES point
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Relationship between Natural Monopoly LRAC and LRMC curves
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Natural Monopoly Diagram
