Suppose that a single firm supplying a particular good has a cost function of the form TC = a + bQ,where both a and b are positive constants,a is large and Q is output.This firm would be classified as
A) a regulated monopoly.
B) an oligopoly.
C) a monopoly.
D) a natural monopoly.
E) unknown since there is insufficient information available.

Question

Quizplus · Accepted Answer

The cost function of the firm indicates that it is a natural monopoly, as its average total cost decreases continually as output increases. This suggests that the firm has significant economies of scale, and it would be difficult for new firms to enter the market and compete with it.

Suppose That a Single Firm Supplying a Particular Good Has