Question

A natural monopoly can occur when the average cost of making a good _____ a lot as output increases.

decreases
increases

Answer 1

The answer is: Decreases

Natural monopoly refers to a type of monopoly that exist because the start up cost to start similar business is too high.

This could only occurs if there is a single company exist for a long period of time, to the point where it acquire enough assets to make the average cost of making their goods at the lowest point while maximizing their inputs.

Answer 2

A natural monopoly can occur when the average cost of making a good decreases a lot as output increases. Hopefully the demand goes up as well!