A) A natural monopoly arises from the deposits of natural resources.
A natural monopoly occurs when only one business is able to produce and deliver goods to the market on a big scale in an efficient and economical manner. There is therefore no room for the other competitors to enter the market.
New competitors will face high entry costs and several obstacles, including those related to manpower, logistics, economies of scale, and others. Monopolistic businesses can also create and deliver goods for the lowest possible cost. Numerous other businesses avoid this market.
Therefore, it is a monopoly where one business controls the market by offering the cheapest good or service. This product or service could not be replaced by one or more rival companies. A corporation that provides tap water is an illustration.
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