For a typical natural monopoly, average total cost is
A)rising, often because marginal costs are very large.
B)rising, often because fixed costs are very large.
C)declining, often because marginal costs are very large.
D)declining, often because fixed costs are very large.

Question

Quizplus · Accepted Answer

Natural monopolies have high fixed costs and low marginal costs. This leads to declining average total cost as production increases, since the fixed costs are spread over a larger output. Therefore, option D is the correct answer.

For a Typical Natural Monopoly, Average Total Cost Is