If it is NOT profitable for more than one firm to be in an industry, we have an example of
A) monopoly due to ownership of key resources.
B) monopoly due to governmental entry restrictions.
C) monopoly due to economies of scale.
D) pure competition.

Question

Quizplus · Accepted Answer

When it is not profitable for more than one firm to be in an industry, it indicates that there are economies of scale present in that industry. This means that as production increases, the cost per unit of production decreases, allowing the firm to reduce its prices and gain a larger market share. As only one firm can fully take advantage of these cost savings, it becomes unprofitable for other firms to compete, resulting in a monopoly due to economies of scale.

If It Is NOT Profitable for More Than One Firm