Generally speaking, if a firm faces decreasing average total costs of production throughout its entire range of output, then
A) more firms will enter the market.
B) it will be unable to remain in business.
C) the firm is a natural monopoly.
D) the firm is able to earn only a normal profit.

Question

Quizplus · Accepted Answer

If a firm faces decreasing average total costs of production throughout its entire range of output, it is said to exhibit natural monopoly characteristics. In this case, it means that the firm has an inherent cost advantage over any newcomer, making it the most efficient producer in the industry. As a result, more firms will not be able to enter the market and compete effectively, and the existing firm will be able to continue operating and earning economic profits in the long run.

Generally Speaking, If a Firm Faces Decreasing Average Total Costs