In a natural monopoly,
A)society would be better off if antitrust laws were used to create many different firms in the market.
B)the marginal cost curve is positively sloped.
C)if the government requires marginal cost pricing, it will likely have to subsidize the firm.
D)the marginal revenue curve is horizontal.

Question

Quizplus · Accepted Answer

In a natural monopoly, due to high fixed costs and economies of scale, average total costs decrease over a wide range of output. If the government mandates pricing at marginal cost, the firm's price might not cover average total costs, potentially necessitating subsidies to sustain operations.

In a Natural Monopoly