Final answer:
A natural monopoly occurs when economies of scale are so extensive that one firm can operate more efficiently than multiple competitors, typically in industries with high initial infrastructure costs and low marginal costs for adding customers. It can also result from a single company's control over a scarce resource.
Step-by-step explanation:
A natural monopoly exists when economies of scale are so large that only one firm can survive while still providing goods or services at a low unit cost. This typically happens in industries where the marginal cost of adding an additional customer is very low once the fixed costs of the infrastructure are in place, such as in utility services where the investment in physical capital (like pipes and cables) is significant yet necessary to provide the service. Natural monopolies may also occur when a single company controls a scarce resource, preventing other companies from competing effectively.
For instance, consider cement production in a local market, where economies of scale and high transportation costs can make it efficient for one producer to supply the area's demand. Similarly, historical examples like ALCOA's control over bauxite resources show how control of physical resources can lead to a natural monopoly situation.
Thus, in the context of this question, b. 'economies of scale are so large that only one firm can survive and achieve low unit costs' is the correct answer. These circumstances make it inefficient for multiple providers to exist due to the duplicative costs and low extra cost of serving additional customers.