Most local phone companies
A)face a horizontal demand curve
B)are regulated
C)are called public utilities
D)have tremendous economies of scale
E)are natural monopolies

Question

Quizplus · Accepted Answer

Local phone companies typically have high fixed costs and low marginal costs, making it difficult for new firms to enter the market and compete. This creates a natural monopoly where one firm can provide the service at a lower cost than multiple firms. As a result, local phone companies are often regulated as public utilities to prevent them from using their monopoly power to charge higher prices and restrict output.

Most Local Phone Companies