If significant economies of scale continue as output increases,
A)then small firms enjoy a cost advantage over large firms
B)minimum efficient scale is small relative to market demand
C)we have the case of a natural monopoly
D)the market will disappear in the long run.
E)all firms will become large.

Question

Quizplus · Accepted Answer

When significant economies of scale continue as output increases, the cost advantage becomes larger and larger for larger firms. This can lead to a natural monopoly where one large firm dominates the market due to its low cost structure. Therefore, choice C (we have the case of a natural monopoly) is the best answer.

If Significant Economies of Scale Continue as Output Increases