A firm with an average total cost curve that has a negative slope at the level of output required to supply the entire market is a natural monopoly.

Question

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A natural monopoly occurs when a single firm can supply the entire market at a lower cost than any combination of two or more firms, primarily due to economies of scale. The negative slope of the average total cost curve at the market supply level indicates decreasing average costs with increased production, characteristic of a natural monopoly.

A Firm with an Average Total Cost Curve That Has