A firm that has economies of scale:
A)at low output and diseconomies of scale at high output is a natural monopoly.
B)over the entire range of output demanded is a natural monopoly.
C)at any particular level of output is a natural monopoly.
D)has a continually rising long-run average cost curve.

Question

Quizplus · Accepted Answer

A firm that has economies of scale over the entire range of output demanded is a natural monopoly. This means that as the firm produces more, its average cost of production decreases. This allows the firm to charge lower prices than its competitors, making it difficult for new firms to enter the market. As a result, the firm becomes a monopoly, which is the only firm producing in the market, and able to charge higher prices.

A Firm That Has Economies of Scale