A natural monopoly features which of the following up to and including quantities that might be demanded at the lowest prices?
A)A declining average cost curve.
B)An increasing marginal cost curve.
C)A U shaped average cost curve.
D)An increasing average cost curve.
E)Both A and B.

Question

Quizplus · Accepted Answer

A natural monopoly features a declining average cost curve, meaning that the more quantities that are produced, the lower the average cost per unit. This is due to the high fixed costs associated with setting up a monopoly, but low marginal costs once the monopoly is established. An increasing marginal cost curve would suggest that the cost of producing each additional unit is increasing, which is not characteristic of a natural monopoly. A U-shaped average cost curve and an increasing average cost curve would also not be characteristic of a natural monopoly.

A Natural Monopoly Features Which of the Following Up to and Including