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Why are utilities, such as electricity and water, examples of natural monopolies?
A-The cost of production restricts competition in the market.
B-There are limited natural resources to meet demand.
C-Consumers only trust known companies to provide these essentials.
D-There is no need for alternative options.

Answer :

C- Consumers only trust known companies to provide these essentials is the natural monopoly related to the utilities like electricity and water.

  • Cost of production promotes the competition in the market.
  • Natural resources are available to utilities but one firm may differ from other in the amount of availability.
  • Alternative options are required if one utility is not able to provide resources other can provide resources.

Hence, options A, B, and D are incorrect.

  • Natural monopoly in terms of industry refers to the condition in which a single firm is able to provide resources at lower cost as compared to the combination of two or more firms.
  • Consumers only rely upon those utilities or firms which they actually trust on the basis of availing better facilities at lower cost.

Hence, option C. is correct.

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Answer:

A: The cost of production restricts competition in the market.

Explanation:

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