Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
High fixed costs that make it difficult for new firms to enter the market
B
A large number of competitors in the market
C
Low consumer demand for the product
D
Government regulations that promote competition
Understanding the Answer
Let's break down why this is correct
Answer
A natural monopoly occurs when a single company can supply a good or service to an entire market more efficiently than multiple companies could. A barrier to entry in this context refers to any obstacle that makes it difficult for new companies to start competing in the market. For example, if a company has already built a large network of pipelines to deliver water to homes, the high costs of building a new pipeline system can prevent other companies from entering the market. This means that the existing company can maintain its monopoly status without worrying about competition. Overall, barriers to entry help protect the monopoly and keep other businesses from successfully entering the market.
Detailed Explanation
High fixed costs are expenses that must be paid before a company can start selling anything. Other options are incorrect because Having many competitors means there is already a market; Low demand means fewer customers, but it doesn't stop new companies from trying.
Key Concepts
Barriers to entry
Topic
Natural Monopolies
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.