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.

Question

Quizplus · Accepted Answer

In a natural monopoly, average total costs decrease as output increases due to economies of scale, which means the firm can produce at a lower cost per unit as it expands production.

What Is Most Likely to Happen as the Output of a Natural