The average cost curve for a natural monopoly is downward sloping where it intersects the market demand curve.

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The downward sloping average cost curve reflects economies of scale, which means that as the natural monopoly produces more output, its average cost decreases. When the average cost curve intersects with the market demand curve, it determines the profit-maximizing output level. This is because at the intersection point, the marginal cost equals the marginal revenue, and the natural monopoly can produce the output level that maximizes its profit.

The Average Cost Curve for a Natural Monopoly Is Downward