A firm that is a natural monopoly
A)is not likely to be concerned about new entrants eroding its monopoly power.
B)is taking advantage of diseconomies of scale.
C)would experience a lower average total cost if more firms entered the market.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than any combination of multiple firms, due to economies of scale. Therefore, it is not concerned about new entrants eroding its monopoly power, as new entrants would face higher average costs.

A Firm That Is a Natural Monopoly