Question

Large public water and sewer companies often become _____ monopolies because they benefit from economies of scale. Although the company faces high start-up costs, the firm experiences _____ average _____ as it expands and adds more customers. Smaller competitors would experience _____ average costs and would be less _____.

Answer 1

Large public water and sewer companies often become natural monopolies because they benefit from economies of scale. Although the company faces high start-up costs, the firm experiences decreasing average costs as it expands and adds more customers. Smaller competitors would experience increasing average costs and would be less competitive.