Question

How are start-up costs related to natural monopolies?

High start-up costs prevent others from offering the same service in a natural monopoly.

Low start-up costs make it easy for companies to have a natural monopoly.

Natural monopolies are held by companies that cannot pay for start-up costs.

The government offers companies money for start-up costs to prevent natural monopolies.
@jim_thompson5910

Answer 1

Hello,

In microeconomics it is taught that when the start up costs are high, it becomes a \(\textit{barrier}\) for any company that wants to compete with the other company. This causes a monopoly, however it is a \(\textit{natural monopoly}\) due to it coming to be a monopoly by itself. So answer choice one seems to be correct.

Further reading:
http://openstudy.com/users/algorithmic#/updates/545de315e4b0c2835b85b7a7

Peace.

Answer 2

I know that Natural monopolies can occur when high barriers to entry or geographic location affect the number of businesses willing to compete in a particular area. i'm confuse between b or d

Answer 3

@Algorithmic

Answer 4

based on what Algorithmic wrote, which one do you think it is?

Answer 5

i'm lending toward b

Answer 6

why B?

Answer 7

reread B) Low start-up costs make it easy for companies to have a natural monopoly.

Answer 8

so A

Answer 9

@jim_thompson5910 because it creating competion for other company

Answer 10

@sunnycali sorry, I was away from keyboard.

Yes, \(a\) is correct.

With higher start up cost, less companies are created causing less competition and generally causing only one company to strive. (i.e. natural monopoly.)

Answer 11

thank you @Algorithmic @jim_thompson5910

Answer 12

You are welcome.