Which statement best explains why a city water system has a natural monopoly structure?A water system may set prices at any level it wants to maximize profits and acts in its own interest.A water system requires so little innovation that there is little incentive for businesses to compete for the market.The cost for a competing water system to enter the market is so high that the return on investment is too low.The marginal cost to additional consumers is extremely high compared with average cost for the water system.

A monopolist will produce where MR is equal to MC. Total revenue is the product of price and…

Answered: Which statement best explains why a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which statement best explains why a city water system has a natural monopoly structure?

A water system may set prices at any level it wants to maximize profits and acts in its own interest.
A water system requires so little innovation that there is little incentive for businesses to compete for the market.
The cost for a competing water system to enter the market is so high that the return on investment is too low.
The marginal cost to additional consumers is extremely high compared with average cost for the water system.

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