Which of the following is a characteristic of a natural monopoly?
A)Average cost exceeds marginal cost over large regions of output.
B)Increasing the number of firms increases each firm's average total cost.
C)One firm can supply output at a lower cost than two firms.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, due to economies of scale. This means average cost exceeds marginal cost over large regions of output, and increasing the number of firms would increase each firm's average total cost.

Which of the Following Is a Characteristic of a Natural