There are a few criteria that are required to constitute a natural monopoly cost structure. Give an example of a firm or industry that has the features of a natural monopoly. Then evaluate the following logic: Recently the US Justice Department/Antitrust Division has approved mergers between airlines and also between telecom firms. Often such mergers are blocked on the grounds that they lead to increased market concentration, but sometimes they are allowed. This might be due to the idea that there's a minimum efficient size necessary in those industry. Does it make sense to extend our understanding of a natural monopoly to create a new concept, a natural oligopoly? (Meaning, the most efficient market structure might be 2-3 strong firms)

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A natural monopoly occurs when the most efficient number of firms in an industry is one due to economies of scale These economies of scale make it mor... View the full answer