Respuesta :
First of all, it is necessary to understand the concept of monopoly, which is the event of a single person or enterprise controlling the supply of a particular commodity. Following that logic, a natural monopoly can be understood as a given industry wherein high infrastructural costs and other barriers to entry relative to the size of the market give the largest - usually the first supplier - in the market a virtually overwhelming advantage over competitors.
Therefore, it is possible to affirm that the lesta likely choice to be allowed to function as a natural monopoly in a society economy is food distribution, which can be performed by several different enterprises/individuals.
On the other hand, watershed management, electricity generation and hazardous waste disposal, due to their high cost of capital, creating economies of scale that are large in relation to the size of the market.
Food distribution would be least likely to be allowed to function as a natural monopoly in a society’s economy due to its very low start-up costs.
Further explanation:
A natural monopoly is a kind of monopoly that comes into existence due to high start-up costs and presence of a high level of economies of scale in a business. Food distribution is least likely to be allowed to work as a natural monopoly due to its low level of cost for starting up. A food distribution industry does not require special kinds of equipment and raw material to operate like the case of other natural monopolies.
Justification for the correct and incorrect answer:
A) Food distribution: This option is correct.
A food distribution industry does not require special kinds of technology, equipment, and raw material to operate and thus, the starting cost of a firm in such an industry is very low. Therefore, a food distribution firm is least likely to be allowed to work as a natural monopoly.
B) Watershed management: This option is incorrect.
The operations of a firm dealing with watershed management need a high level of technology and huge costs. This provides a rationale that why a watershed management firm is most likely to be a natural monopoly in an economy.
C) Electricity generation: This option is incorrect.
The initial costs associated with setting up of an electricity generation plant are substantial. The technology used in electricity generation is also highly technical and thus, it is more likely to be a natural monopoly.
D) Hazardous waste disposal: This option is incorrect.
The plants, equipment, and technique used in hazardous waste disposal are very sophisticated involving advanced technology. This raises the costs of setting up a plant for hazardous waste disposal. Thus, a hazardous waste disposal firm is more likely to be a natural monopoly.
Therefore, food distribution is least likely to be allowed to work as a natural monopoly in an economy.
Learn more:
1. Learn more about cartel and monopoly
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2. Learn more about monopoly
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3. Learn more about a competitive market
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Answer details:
Grade: Senior School
Subject: Economics
Chapter: Natural monopoly
Keywords: what, choice, would be, least likely, to be allowed, to function as, a natural monopoly, in an economy, food distribution, watershed management, electricity generation, hazardous waste disposal, huge start-up cost, unique raw material, equipment, technology, sophisticated inputs.
