Asked by Reyna Nava Sanchez on May 21, 2024
Verified
What is most likely to happen as the output of a natural monopoly increases over the range of market demand?
A) There is a small decrease in average total cost and then it increases as output increases.
B) There is an increase in average total cost and then it decreases as output increases.
C) Average total cost increases as output increases.
D) Average total cost decreases as output increases.
Natural Monopoly
A situation in which a single firm can produce the entire market output at a lower cost than could several firms, making it most efficient for a single firm to serve the entire market.
Average Total Cost
The total cost of production divided by the total quantity of output produced.
- Become familiar with the idea of natural monopolies and the basis for the control of industry.
Verified Answer
VO
Viviane OduorMay 24, 2024
Final Answer :
D
Explanation :
In a natural monopoly, average total cost decreases as output increases due to economies of scale. This means that as the company produces more, the cost of producing each additional unit falls.
Learning Objectives
- Become familiar with the idea of natural monopolies and the basis for the control of industry.
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