Graph 15-1
-Refer to Graph 15-1.The shape of the average-total-cost curve reveals information about the nature of the 'barrier to entry' that might exist in a monopoly market.Which of the following monopoly types best coincides with the figure?
A)natural monopoly
B)government-created monopoly
C)ownership of a key resource by a single firm
D)none of the above

Question

Graph 15-1 
-Refer to Graph 15-1.The shape of the average-total-cost curve reveals information about the nature of the 'barrier to entry' that might exist in a monopoly market.Which of the following monopoly types best coincides with the figure?
A)natural monopoly 
B)government-created monopoly 
C)ownership of a key resource by a single firm 
D)none of the above

Quizplus · Accepted Answer

The shape of the average-total-cost curve in the given graph is downward-sloping and continuously declining, indicating that the firm is a natural monopoly. In a natural monopoly, the firm has such a cost advantage over potential competitors that it can produce the entire market output at a lower per-unit cost than any potential competitor. The high fixed costs prevent other firms from entering the market, leading to the existence of a single dominant firm in the industry.

Graph 15-1 -Refer to Graph 15-1.The Shape of the Average-Total-Cost Curve Reveals