A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a
A) regulated monopoly.
B) perfect competitor.
C) government monopoly.
D) natural monopoly.

Question

Quizplus · Accepted Answer

A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a natural monopoly. This occurs because the fixed costs of producing the good or service are so high that it is more efficient for one firm to supply the entire market than for multiple firms to compete. As the firm produces more output, the fixed costs are spread over a larger quantity of output, resulting in decreasing average total costs.

A Firm Whose Average Total Cost Continually Declines at Least