CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

A natural monopoly is a monopoly ______

A. that exists because of economies of scale.
B. that is created by natural law.
C. where natural legal barriers prevent entry.
Correct Answer: A

Large fixed costs in an industry create barriers to entry. Average total costs decline as output rises, so that it is more efficient for there to be one producer. This situation is known as a natural monopoly.

User Contributed Comments 2

User Comment
Rivermax eg quarry mining
hoyleng B & C is legal barrier
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