Final answer:
Yes, monopolies, especially natural monopolies, can often benefit from economies of scale, where the marginal cost of adding additional customers is low, making their services more efficient and cost-effective than having multiple smaller providers.
Step-by-step explanation:
It is true that monopolies can often experience economies of scale. This is particularly common in the case of natural monopolies, where one firm can supply the total quantity demanded in the market at a lower cost than if the market were divided among multiple firms. These economies of scale arise because once the company has invested in fixed costs, like infrastructure, the marginal cost of servicing additional customers is relatively low, resulting in substantial savings as production levels increase.
For example, once a water company has installed main pipelines or an electric company has laid down electrical lines, taking on additional customers becomes very low cost. This makes it inefficient for new companies to enter the market, as they would have to replicate the same large-scale investments in infrastructure. Therefore, in industries such as these, natural monopolies serve the market more efficiently than multiple, smaller competitors would.
Most true monopolies in the United States today are regulated natural monopolies since leaving them unregulated would pose significant issues for competition, potentially leading to higher prices and less efficient service provisions for customers.