In a natural monopoly, a single firm can serve the entire market demand at a lower cost due to _____, which allows it to produce more efficiently than multiple firms could.

In a natural monopoly, a single firm can serve the entire market demand at a lower cost because of economies of scale. This means that as the firm produces more goods, the cost of making each additional unit decreases. For example, think of a water supply company that builds a large pipeline to deliver water to many homes. If there were many smaller companies trying to build their own pipelines, they would each have high costs, making it more expensive for everyone. Therefore, having one large company is more efficient and can provide services at a lower price for consumers.