If a firm can prevent competitors from entering its market, its ATC will ___________ over a ________ amount of output.

Question

Quizplus · Accepted Answer

If a firm can prevent competitors from entering its market, it is operating as a monopoly. Monopolies have high barriers to entry, such as patents or exclusive access to resources, that prevent other firms from entering the market. This lack of competition allows the firm to produce at a larger scale, which typically leads to lower average total costs (ATC). Therefore, the firm's ATC will decline over a large amount of output.

If a Firm Can Prevent Competitors from Entering Its Market